Myths About Credit Score

Did you know there’s a misconception that carrying a balance on your credit card from month to month can benefit your credit score?

That is not true, ideally you should pay your credit card in full each month. Carrying a balance will not help your credit scores. All it will do is cost you money in the form of interest.

The lower your utilization ratio, the better it will be for your credit scores. The utilization rate is calculated by dividing your monthly statement balance, the amount shown on your bill, by your loan limit.

However, it can be strategic to reduce your utilization rate if you pay the bill before your statement is generated.

For example, if you have a total credit limit of $5,000, spend $2,000 on your credit card and pay off $1,500 of that spend before your credit card statement is generated. The statement will only reflect $500, therefore your utilization rate will be considered 10% and not 40%.

It’s best to pay off your credit card balance in full each month.

If you are trying to establish a solid payment history, we recommend the following:

• You can make small purchases on the credit card each month, paying the balance in full and making sure all payments are made on time.
• If you can’t pay the balance in full, keep it as low as possible.
• You should never carry a balance of more than 30% of your credit limit on one card or in total. The lower your balances, the better it is for your credit scores.
• Pay the credit card bill before the statement is generated.