Should You Carry Zero Balances?

Posted on February 3, 2009

It is a common belief that you need to have some revolving debt to get an good FICO score.  Well, that might not be entirely true.

What does carry no revolving debt really say about a person?  They have control enough not to use their credit card and save for purchases.  This is a respectable attribute and they will not be penalized when calculating your FICO score.

The real truth is you can have a excellent credit score, above 730 or so, without carrying revolving debt.  The highest scores will use revolving debt, but the interest rates you will get with an excellent score are not going to be much different if any then if you have a good  score.  Remember lenders group scores together to assign what is bad, good, or excellent.

What revolving debt does is gives you a wider base of credit and contributes to you having a healthy mix.  This factor is 10% of your FICO score and carries the smallest weight.

If you choose to not carry debt it won’t be the end of the world for you or your FICO score.  Chances are if have no revolving debt you proably are attractive to lenders.  They want a person who is this responsible.  They compare you to the rest on the consumers.  You are less of a risk and should get a good interest rate on all your loans.

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