There is a widespread – but completely wrong – belief that you must have credit on your credit card in order to build credit. This myth couldn’t be further from the truth, but experts say they still hear it often from credit card holders.

“That’s the myth I’ve been shattering all my career,” says Beverly Harzog, a credit card expert and consumer finance analyst for US News & World Report. “Essentially, you believe that you have to pay interest to get good credit, but you can get great credit for free. It just takes time and patience and the timely payment of your bills. “

That’s because your payment history – which shows that you can pay your bills on time each month – is the most influential factor in your creditworthiness. And a low (or ideally no) credit balance also has a positive effect on the second most important influencing factor, credit utilization.

“It is not necessary that you carry a balance with you to build up good credit,” says Anna N’Jie-Konte, CFP and founder of Dare to Dream Financial Planning. “You need to prove that you are using the card and paying. That is the most basic. “

Here’s everything you need to know about building your creditworthiness to avoid falling for this widespread myth and what to do if you currently have credit on your credit card.

How having a credit balance affects your creditworthiness

There is essentially “no benefit” in having a balance on your credit card, says Larry jump, CFP and founder of Mitlin Financial.

Carrying a scale is expensive to start with. Any day that you fail to pay your bank statement in full beyond the monthly due date, interest will accrue on the remaining balance until payment. This can lead to a slippery increase in long-term debt as most credit cards charge very high APR – between 10% and more than 25% – on your balances.

Keeping a balance can also increase your credit utilization rate. This is the total amount of available credit you are using compared to the total amount of available credit. For example, if you have a credit limit of $ 5,000 and you have $ 3,000 monthly credit, you have a high usage rate of 60%. Experts recommend keeping this rate below 30%, although below 10% is ideal for building credit. Increasing the utilization can decrease your credit score as it signals to lenders that you may be in financial trouble.

Better ways to build credit

Your creditworthiness affects many different aspects of your financial life, from buying a car to buying a house to renting an apartment. Because of this, it is important to monitor your credit score and make sure that you are practicing the habits that can help you build and maintain a solid credit score.

Credit building can take some time, but there are several ways to get started – without carrying a credit:

• Pay your credit on time: Payment history matters 30% of your credit score, so it is important not to miss any payments. By automating your payments, you can keep track of your credit card bills.
• Keep your occupancy low: A 30% loan utilization rate is as high as you want according to the experts, but you should try to keep it as low as possible.
• Check your creditworthiness regularly: There is a difference between your credit report and your credit score, but it’s important to keep track of both. visit AnnualCreditReport.com to access your credit report. To check your creditworthiness, log into your online account with your credit card issuer.
• Correct any mistakes in your credit report: Federal Reserve data shows that one in five people has a bug in their credit reports. Detecting inconsistencies or mistakes in your credit report early on can save you from being caught off guard by a sudden drop in your creditworthiness.
• Discover Credit Boost Programs: Tools like Experian Boost, TransUnion’s eCredable Lift, and FICO’s UltraFICO Score leverage information not normally used in credit score data, such as credit rating data. However, you must sign up to actively sign up for these programs.

What to do if you have credit now

If you currently have a credit balance on a credit card, focus on eliminating that debt before you accrue any more interest. Even if you have other debts, fighting credit card debt can save you more money in the long run, as credit cards tend to have higher interest rates than other types of credit.

One option that you should consider is transferring your debt to a credit card for balance transfer. These cards offer an introductory price of 0% APR for a limited period of time – often 12, 15 or 18 months – during which you can make payments directly to your balance without paying additional interest. This can help you save money in the long run, but only if you create a plan and commit to cashing out your balance during the 0% APR introductory period.

Some of NextAdvisor’s top picks for credit transfers include the US Bank Visa® Platinum Card, Citi Simplicity® Card, and BankAmericard® Credit Card, among others.

You can also get a personal loan from a bank or credit union to consolidate your debt. The interest rates on these loans are determined by your creditworthiness, income, and debt. So, do your research to make sure that you are actually saving money by getting a personal loan with a better interest rate. Remember that there are usually upfront fees that can be up to 8% of the loan amount.

If you are looking for free or low-cost help with your debt, consider working with a nonprofit credit counseling agency. Credit counselors can be a great resource for budgeting and money management advice, and they can also provide you with a debt management plan (DMP) for a small fee. Accreditation is key so look out for the initials NFCC (the National Foundation for Credit Counseling) and FCAA (Financial Counseling Association of America) in finding a reputable credit advisor.

Bottom line

Your credit score is never set in stone – it can go up or down depending on your credit habits. However, keeping a balance on a credit card isn’t the way to increase your score and can often have the opposite effect or result in permanent debt.

Instead, the key to consistently good credit is managing your debt responsibly every month. That means paying your credit card bills on time, paying your balance in full, and checking your balance regularly. And if you currently have a balance and are struggling to pay it back, there are debt settlement options such as a balance transfer card with a long interest period of 0%, debt consolidation loans, or consulting a credit counselor.