Should You Carry a Credit Card Balance When Building Credit?

Carrying a credit card balance is often seen as a bad thing, but when it comes to building credit, it can actually be beneficial if done responsibly. Here’s what you need to know about carrying a credit card balance as you build your credit history.

Understand your credit utilization ratio 

Your credit utilization ratio is the amount of credit you are using compared to the amount of credit available to you. Generally, it is recommended to keep your credit utilization ratio below 30%. So, if you have a credit card with a $1,000 limit, you should aim to keep your balance below $300.

Keep your balances low

As mentioned before, carrying a high balance on your credit card can hurt your credit score. So, make sure to keep your balances low and pay them off in full each month. Pay attention to when the credit bureau reports your card to the credit bureaus each month and try to pay your balances off before that date.

Make payments on time

Late payments can have a negative impact on your credit score, so be sure to make at least the minimum payment on time every month. If you are able to pay more than your minimum balance, try to pay down your balance as much as possible. 

Pay more than the minimum

While paying the minimum amount due is important, paying more than the minimum amount can help you pay off your balance faster and improve your credit score. This can also help you with your credit utilization; having lower credit utilization will help boost your credit score. Remember, you’ll want to keep your utilization under 30% of your credit limit. 

Monitor your credit

Check the information on your credit report periodically to make sure it’s accurate since mistakes on a credit report can bring down your credit score. Dovly is an AI credit engine that can help you dispute any errors you find on your credit report. Try it risk-free with our free membership tier. Get in touch with Dovly today.

It’s important to remember that carrying a credit card balance doesn’t mean you should max out your credit card or constantly carry a high balance. It simply means using your credit card responsibly, keeping your balances low, paying on time, and monitoring your credit score.

By following these tips, you can build your credit history while carrying a credit card balance. Remember that the key is to use credit responsibly and always make sure to pay your bills on time.