How Having a Zero Balance Affects Your Credit Score

Woman paying credit card balance on computer
••• baona/iStock

The amount of debt you’re carrying is 30 percent of your credit score, so your credit card balance obviously impacts your credit score. Having big balances can hurt your credit score because it raises your credit utilization — the ratio of your credit card balance to your credit limit.

Some people, however, believe that carrying a balance is necessary to build a good credit score. Others have concerns that a zero balance can harm their credit scores. It’s not true — a zero balance won’t bring down your credit score, unless however, you have a zero balance because you haven’t been using your credit card. In that case, the credit card issuer may stop sending credit report updates for that account and may even close the credit card, both of which can affect your credit score.

Zero Balance and Your Credit Report

Having a zero balance on your credit card, e.g. because you pay off your credit card in full every month, doesn’t mean that the zero balance will show up on your credit report — or that the zero balance will be used to calculate your credit score. Here’s why: your credit card details are reported at various times throughout the month (usually on the account statement closing date). Your credit card balance might not be $0 on the day your credit card issuer reports to the credit bureaus. For example, if you make a purchase $100 on the 5th of the month and pay it in full on the 17th of the month, but your credit report was updated on the 12th of the month, your credit report won't show a $0 balance.

Unless your balance is always zero, your credit report will probably show balance higher than what you're currently carrying. 

Fortunately, not having a zero balance won't hurt your credit score as long as the balance you do have isn't too high (above 30 percent of the credit limit).

Your credit score could be affected if you have a $0 balance for several months because you're not using your credit scores. In that situation, you don't have any credit card payment history to help boost your credit score. Potential creditors and lenders can't tell whether you're a responsible borrower because your credit report doesn't have a recent history of your borrowing.

Getting the Balance You Want to Report

If you’re applying for a major loan soon and want to improve your chances of being approved, pay your credit card balances down and don’t make any additional purchases for a few weeks. That way, you can be sure a low (or zero) balance shows up on your credit report and is reflected in your credit score.