If you have ever heard that carrying a small balance on your credit card each month helps build or maintain a good credit score, you are not alone. It is one of the most persistent myths in personal finance, repeated at kitchen tables and in casual conversations with such confidence that millions of people have quietly accepted it as fact. The truth is the opposite: carrying a balance does not help your credit score, it costs you money in interest, and in many cases, it actively works against the score you are trying to build. Here is what the evidence actually shows, how credit scores work, and what you should do instead.

How Widespread the Myth Really Is

The scale of this misunderstanding is remarkable. According to a survey from U.S. News and World Report, 48 percent of people incorrectly believed that carrying a credit card balance improves their credit score. A separate survey found the problem to be even more pronounced among younger adults. A LendingTree survey of more than 1,000 American adults found that roughly two-thirds of respondents believed carrying a small balance on their credit card each month would improve their credit score, with that percentage rising to 79 percent among Gen Z consumers.

This is not a minor misunderstanding. This myth has cost Americans billions in unnecessary interest payments, and the credit card industry has zero incentive to correct it. At a time when the average credit card APR sits above 20 percent, paying interest on a balance you did not need to carry in the first place represents a significant and entirely avoidable financial loss.

What the Scoring Model Actually Says

The verdict from the organizations that create and regulate credit scores could not be clearer. The Consumer Financial Protection Bureau states directly that paying off your credit cards in full every month is the best way to improve a credit score or maintain a good one. MyFICO — the company that created the FICO score — is equally direct: not paying off in full the credit card balance reported on your credit card statement will likely cost you money as interest accrues, and it does not help your FICO scores. When both the federal regulator and the company that invented the scoring model agree, the debate is over.

While it is true that actively using and managing your credit can help you meet the minimum criteria to generate a FICO score and improve it over time, you do not need to carry a balance or pay interest to accomplish this. Using a card and paying it in full accomplishes everything the scoring model rewards. Carrying a balance and paying interest adds only cost.

How the FICO Score Is Actually Calculated

Understanding why carrying a balance fails to help — and often hurts — requires a basic understanding of how credit scores are structured. FICO groups the data in your credit report into five categories: payment history at 35 percent, amounts owed at 30 percent, length of credit history at 15 percent, new credit at 10 percent, and credit mix at 10 percent. Two factors alone — payment history and amounts owed — control nearly two-thirds of your score, and neither one rewards carrying a balance.

Payment history is the single largest component in the entire calculation. Paying your bills on time is the key to earning an excellent score, and late payments can cause a measurable drop, with damage that compounds with each additional missed cycle. Carrying a balance has absolutely nothing to do with payment history. What matters is whether you pay on time, not whether you carry debt from month to month.

The second factor — amounts owed — is where carrying a balance does its most direct damage. Credit utilization, which measures how much of your available credit you are using, is the second most influential credit score factor. To avoid credit score damage from high credit utilization, you want to keep it under 30 percent. The lower the rate, the better for your credit, and it is recommended to aim for a credit utilization rate of 10 percent or below for the best score.

Carrying a balance raises your utilization, which works against you rather than for you. A person who carries a $2,000 balance on a card with a $5,000 limit is running 40 percent utilization — above the threshold that starts to hurt scores — while simultaneously paying interest on that balance every month. They would build a stronger score and keep more of their money by paying the balance in full.

Why the Myth Persists: The Statement Date Confusion

Part of the reason this myth has proven so durable involves a genuine misunderstanding of how credit card balances get reported to the credit bureaus. Many people believe that paying a card in full means the bureaus see a zero balance, which they assume looks bad, as though the card is not being used. The balances on credit reports do not necessarily reflect current account balances. Generally, credit card issuers report account information to the credit bureaus once a month on the card’s statement closing date at the end of each billing cycle. You then have about three weeks to pay the credit card bill before the due date. The balance as of the statement closing date is what gets reported and appears on your credit report.

This means that if you use your card regularly throughout the month and pay the statement balance in full by the due date, the bureaus still see an active, responsibly managed account with a real balance — just one that you chose not to carry forward as interest-bearing debt. You get all the credit-building benefits of active card use and none of the interest charges.

If you want the reported balance to reflect an even lower utilization ratio, you can pay your balance before the statement closing date. That way, a lower figure gets reported to the bureaus even though you used the card during the month.

The Real Drivers of an Excellent Credit Score

Building and maintaining an excellent credit score — generally considered a FICO score of 800 or above — requires consistent attention to the factors that actually move the needle.

Payment history is the foundation of everything. Even one late payment on a credit card or installment loan can knock 50 to 100 points off a strong score, and that record stays on your report for seven years. Setting up automatic payments for at least the minimum amount due on every account eliminates the risk of a missed payment due to an oversight. Paying the full statement balance by the due date eliminates interest charges entirely.

Keeping utilization low is the second major lever. Trying to use 30 percent or less of your available credit is the general guideline, but staying at or below 10 percent is associated with the strongest scores. If you find your utilization creeping up because of a large purchase, you can make a mid-cycle payment before your statement closes to bring the reported balance down.

Length of credit history accounts for 15 percent of your score, which means keeping older accounts open — even those you rarely use — tends to support your score by maintaining the average age of your accounts. Closing a long-standing card, particularly one with a high credit limit, can simultaneously shorten your average account age and reduce your total available credit, both of which can lower your score.

New credit and credit mix each account for 10 percent. It is typically best to apply for new credit only when you need it rather than to open accounts purely to improve your credit mix. Applying for multiple loans in a short period can signal financial distress to scoring models. Credit accounts should be added gradually so that the impact of new credit is slowly absorbed.

What About Keeping a Card Active?

One version of the balance-carrying myth holds that you need to leave a small balance unpaid to prevent your card issuer from closing your account due to inactivity. This concern is understandable but overstated. You only need to use the card periodically to keep it active — you do not need to carry a balance. Making a small purchase once a month or every few months and paying it in full keeps the account active, keeps your credit history current, and costs you nothing in interest.

The Cost of Getting This Wrong

The financial consequences of following this myth extend well beyond the psychological comfort of feeling like you are doing something good for your credit. The average APR on credit cards is above 24 percent, meaning that carrying a balance is pure profit for the card issuer and pure loss for you. On a $1,000 balance at that rate, a person who carries it for a year pays roughly $240 in interest, while receiving no credit score benefit whatsoever in return.

If someone is only carrying a small balance, it may not cost them a huge amount of money in any single month, but over time ,it adds up significantly. Across years of unnecessary interest payments, the cumulative cost of this myth runs into thousands of dollars for many households — all spent in pursuit of a credit benefit that does not exist.

The Simple, Correct Approach

Building and maintaining an excellent credit score requires nothing more complicated than using your credit cards regularly, paying the full statement balance on time every month, keeping your utilization well below 30 percent, and letting time work in your favor by keeping accounts open and avoiding unnecessary applications for new credit. There is no benefit — none — to carrying a balance and paying interest. The scoring model does not reward it, the federal regulator does not recommend it, and the company that invented the FICO score explicitly calls the idea a myth.

Pay in full. Keep utilization low. Pay on time, every time. That combination, sustained over years, is the actual path to an excellent credit score — and it costs you nothing extra to follow it.