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Should I Carry a Balance on my Credit Card to Increase my Credit Score?

If you have bad credit or no credit, you may be thinking of fast ways to improve your credit score, such as carrying a balance on your credit card to increase your credit score.

Imagine that you want to take a bucket full of water from a well to your garden so you can water your plants. In many ways, the title question is similar to asking “Should I put a hole in my bucket to make it lighter?” While you might congratulate yourself on using your available resources to make your life easier, you’re actually hurting yourself in the long run.

At first, you notice a slight improvement. The bucket feels a little lighter, so it’s easier to carry. As time goes on, your bucket becomes even lighter, and you can walk a little faster. However, by the time you reach your garden to water your plants, you see that all the water is gone – you focused too much on making the journey easy that you forgot about what the end result would be! Now you’re much farther from the well than you were at the start, and your plants are much thirstier than before. You have to spend more effort going back to well again, and you’ve wasted a bunch of your time.

Carrying a credit card balance month-to-month is the same. The bucket is your credit card, the water is your money, and the plants are your future. A monthly balance adds a hole to your bucket, letting your savings leak out. Because it can happen so slowly, you may not notice it until you reach the end and see how little you have left. Your investments are left high and dry because you spent money on interest instead of investing in your RRSP or TFSA, or even putting it away in a high-interest savings account.

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Credit Score Isn’t a Product, It’s a By-Product

Your credit score isn’t a product. It’s a measure of how likely you are to repay your debts, which means it’s a consequence of good financial decisions. Because it isn’t a product, that means you shouldn’t try and buy a better score. By taking on debt that you don’t need, you’re paying interest for no reason other than to improve your score. Instead, you should focus on paying your debts on time and in full, or, if you can’t pay in full, then pay as much as you can.

Don’t Be Discouraged by Debt

Making the minimum payment on a credit card is never a good idea unless you have a concrete debt elimination strategy, such as the debt snowball or the debt avalanche. If you pay the minimum payments because you feel that it would be too expensive to pay off your debt, or that your debt is so large that it doesn’t matter how much you pay, you’re not thinking long-term. Paying your credit card bill in full every month will have a positive effect on your credit score and doesn’t require you to pay 20% APR.

It’s ok to feel discouraged at the start. It’s exceptionally easy nowadays to find yourself in credit card debt, and Canadians have one of the highest debt-to-income ratios in the world. However, that’s no reason to purposefully add to your debt in an attempt to improve your credit score.

The only person the benefits from you carrying a balance on your credit card is the CEO of the credit card company. Any interest you’re charged on your card is profit for the credit card company. The fastest way to increase your credit score is to make your payments on time and in full, and even then it will take some time.


Chris Chris 01/26/2019
Canadian personal finance buff and all-around writing enthusiast, Chris loves breaking down complicated money ideas to show that they're really not so complex. 
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