How Do Account Balances Affect Your Credit?

Quick Answer

The number of credit accounts you have with balances and an account’s balance relative to its credit limit or initial loan amount may affect your credit scores. But only accounts that appear in your credit reports can impact credit.

A man sitting at his desk at night, looking at a paper copy of his account balance and talking on the phone.

The balances on credit accounts, such as credit cards and loans, will usually affect your credit scores. These accounts might help your scores if you make payments on time and are paying down the balances, or hurt your scores if you have a high balance or late payments. Accounts that don't appear on your credit reports, such as bank accounts, won't affect your scores at all.

Do All Account Balances Affect Your Credit?

Account balances only affect your credit if they appear on your credit report. When they do, credit scoring models consider the account's information, including its balance, when calculating your credit score. Accounts that don't appear in credit reports, such as bank accounts, won't affect your scores.

Most major credit card issuers and lenders report your credit cards and loans to all three credit bureaus—Experian, TransUnion and Equifax. Your account balances can affect your credit scores in different ways depending on what's being reported, the type of account and your overall credit file. For example, credit scores may consider:

  • How much money you owe overall
  • How much you owe on various types of accounts
  • The number of accounts you have with balances
  • The percentage of credit accounts you have with balances
  • Whether you have past-due balances
  • Whether you have a mix of installment and revolving credit accounts with balances

Beyond affecting the number of accounts with balances and your credit mix, let's take a closer look at four common types of accounts and how their balances could impact your credit scores.

How a Credit Card Balance Affects Your Credit Score

Your credit card balance affects your credit utilization ratio—the percentage of the card's credit limit in use. Credit scores calculate utilization ratios based on the balance and credit limits in your credit reports, which may be different from your current balance.

Credit utilization can be a significant scoring factor, and a low utilization rate is best for your scores. That might mean a $20 balance if your card has a $200 limit (a 10% utilization rate), or a $2,000 balance if your card has a $20,000 limit. The percentage, not the amount, is what determines the utilization rate.

Your overall utilization rate from combined balances and limits can affect your score, as can the utilization rate for individual credit cards. Some credit scores also consider trends in your utilization and balances, such as whether your utilization rate and balances are increasing or decreasing.

How a Line of Credit Affects Your Credit Score

Personal lines of credit and home equity lines of credit (HELOCs) are also revolving credit lines, similar to credit cards. Their balances and credit limits might be included in credit utilization calculations; however, some credit scores exclude HELOCs when calculating utilization.

How a Loan Balance Affects Your Credit Score

Your loan balances and the amounts you owe relative to how much you borrowed can also affect your credit scores. But this isn't as significant of a factor in your credit scores as the utilization rate on your revolving credit accounts.

How a Bank Account Balance Affects Your Credit Score

Banks don't report your bank account balances or usage to the credit bureaus, so your bank accounts won't affect your credit score. However, some creditors can use your bank account history and balances instead of or in addition to your credit history and scores to evaluate your application.

The approach, called cash flow underwriting, often requires applicants to link their bank account when applying for a new credit account. By analyzing banking history, creditors may be able to offer a loan, line of credit or better terms to an applicant who has trouble qualifying based on their credit history.

How to Manage Multiple Account Balances

There are a few strategies that might make managing multiple loans and credit cards easier:

  • Pay down account balances early. Some people use an all zero except one (AZEO) approach to managing multiple credit cards. Even if they regularly use different cards for the various rewards and cardholder benefits, they pay off the balances before the end of each billing cycle. As a result, the card issuers report a zero balance to the credit bureaus. However, they let one credit card report a small balance, because a very low credit utilization ratio is better for your credit scores than no utilization.
  • Consolidate balances. You might be able to consolidate accounts by transferring balances between credit cards or taking out a new loan to pay off multiple accounts. Consolidating debt can sometimes lower your monthly payments and decrease how much interest accrues. Additionally, it may be easier to manage fewer accounts.
  • Set up autopay. You can often set up automatic loan and credit card payments, which can help you avoid accidentally missing a bill. If you do miss a payment, the creditor might charge you a late payment fee. And once your payment is 30 days past due, it can report the late payment to the credit bureaus, which will likely hurt your credit scores.
  • Use payment reminders. Alerts and calendar reminders can also be helpful if you want to be sure you don't accidentally miss a payment. You can also use these to remind you to pay down credit card balances before the end of each billing cycle.

How to Pay Off Account Balances

There are many ways to approach paying off debt, and the best method may depend on your financial situation and mindset. A few popular methods include:

  • Try the debt snowball method. List all your account balances along with their monthly payments and interest rates. Put any extra money you have toward paying off the account with the lowest balance first. Then, use the momentum from crossing one debt off your list to focus on the next.
  • Use the debt avalanche method. Alternatively, list all your accounts and their information and then focus on paying off the debt with the highest interest rate. The avalanche method might save you the most overall, but it may be harder to stay motivated if it takes a long time to completely pay off the first few accounts.
  • Cut spending. Saving money on other expenses, such as subscriptions, groceries, eating out, insurance premiums or other regular bills, can free up money for additional debt payments. As you pay down credit card balances, less interest will accrue each month, which frees up even more money.
  • Use a balance transfer credit card. Some credit cards offer an introductory 0% annual percentage rate (APR) on balances that you transfer to the card. Although there's often a balance transfer fee, your entire payment can then go toward paying down the principal balance instead of paying interest.
  • Consolidate debts with a personal loan. You might be able to use a personal loan with a low interest rate to pay off higher-rate credit cards and loans. Consolidating debts could make managing your bills easier and save you money overall.

Check Your Credit Score and Credit Offers

You can check your FICO® Score for free from Experian and use your membership to monitor your Experian credit report and FICO® Score over time. You can also review each of your accounts, their recently reported balances and their utilization rates. If you think a balance transfer card or personal loan could help you manage or pay off your debts, Experian can match you with loan and credit card offers based on your unique credit profile.