How Credit Card Debt Ruins Credit Scores Even If You Pay On Time

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Many credit card holders are surprised to learn that credit card debt can wreck your credit scores even if you make your payments on time. We’ll explain why this happens and how to protect your credit scores.

Your credit scores are one of the biggest factors lenders use to determine your creditworthiness. If you have low credit scores, you may find it difficult to qualify for a loan.

And even if you do qualify, you may find yourself paying much higher interest rates and fees to get the loan.

The bottom line is this: the higher your credit scores, the better the deal you’ll get on your next home loan, auto loan, or credit card.

We’ll explain one of the most common reasons many people have much lower credit scores than they should, even though they make their payments on time.

Credit Card Debt Can Wreck Your Scores

Many credit card holders are surprised to learn that credit card debt can do serious damage to credit scores even if you make your payments on time.

I have a lot of experience as a mortgage professional, which means I’ve seen thousands upon thousands of credit reports over the years.

When I see credit reports with no late payments and no derogatory credit items such as bankruptcies, foreclosures, collections, chargeoffs, etc., yet the scores are low, the issue is usually credit card debt. The applicant is simply carrying too much credit card debt and it’s wrecking their scores.

To see why this happens, let’s explore the various factors that go into the credit score calculation.

How Credit Scores Are Calculated

Credit scores range from a low of 350 to a high of 850. According to, the average credit score in the United States was 711 in 2021. There are five main factors that influence your credit scores:

  • Payment history: 35%. Payment history makes up the largest portion of the calculation. It’s very important to make your payments on time if you want to have strong credit scores.
  • Credit utilization: 30%. If you have high utilization (i.e., you’re “maxed out”) on your credit cards, your scores will take a hit. Ideally, you want to keep your utilization on revolving accounts such as credit cards below 30% of the credit limit. This is important even if you pay off your credit cards in full every month.
  • Credit age: 15%. Length of credit history contributes to good credit scores. Avoid closing old accounts unless absolutely necessary.
  • Credit mix: 10%. Lenders like to see a mix of different types of credit accounts, such as revolving (credit card) accounts and installment loans like mortgages, car loans, etc.
  • New credit: 10%. Be careful when applying for new credit cards or loans. Too many new accounts can damage your credit scores.

As you can see, credit utilization is one of the most important factors that goes into your credit scores. If you have large credit card balances, you likely have high utilization, which will damage your scores even if you make your payments on time.

Here’s the moral of the story, so to speak: keep your utilization below 30% of your credit limits at all times. If you need to run up balances higher than 30% of your limits on a regular basis (such as if you have a business), you may want to ask your credit card issuer to increase your credit limit.

Of course, take care that you don’t end up needlessly running up even higher balances.

How Can I Improve My Credit Scores?

If you want to improve your credit scores, the most important thing is to make your payments on time.

As we’ve already discussed, you also want to avoid overutilizing your revolving credit. A high utilization can severely damage your credit scores even if you make your payments on time.

If you’d like to close a few accounts, be sure to leave older accounts open. Length of credit history contributes to good credit scores as well.

Be careful not to open too many new credit accounts at one time. If you’re shopping aggressively for new loans, your credit scores may take a hit.

Mike Roberts
About Mike Roberts

Mike Roberts is the founder of, a published author, and a highly experienced veteran of the mortgage industry. When he's not working, he enjoys spending time with his family, skiing, camping, traveling, or reading a good book. Roberts is the author of The Reverse Mortgage Revealed: An Industry Insider’s Guide to the Reverse Mortgage, which is available on Amazon.