Does Buying Something on Revolving Credit Hurt My Credit Score?

Every purchase you make on credit may take a few points off of your credit rating. However, a credit card balance does not damage your credit rating as long as you pay off the bill every month. You can avoid wracking up too much credit card debt by not using a card, but this may hurt you more than making purchases.

Identification

Buying something on revolving credit, such as a credit card or home equity line of credit, hurts your credit rating if you carry the balance over to the next month. If you pay a credit card bill by the due date, the lender reports the account as active and paid as agreed, but with a balance of $0. If you carry a balance, the credit bureaus add the debt to your credit profile. The amount of debt owed to creditors counts for 30 percent of a FICO rating, according to the Fair Isaac Corporation.

Considerations

Not using a revolving line of credit can damage your score more than carrying a balance. If you do not use an account for 6 to 12 months, the lender may report it as inactive. The bureaus do not add the limit on an inactive account to your credit utilization ratio, or percent of total revolving credit limit available. If you have a balance of $5,000 across revolving accounts with a total limit of $10,000, you have a credit utilization ratio of 50 percent. If an account with a $2,500 limit goes inactive, your utilization ratio jumps to 75 percent. In general, you should keep utilization below 36 percent, according to Gregory Taggart of Bankrate.

Potential

Buying anything on credit risks that you pay much more than retail for the item because carrying a balance accrues finances charges. Also, if a sudden disaster strikes, such as unemployment, you may not have the resources to pay off the debt. Missed payments -- or worse, a collection account -- can ruin your credit score for seven years. Any major negative actions can take 100 or more points off of a credit rating.

Tip

If you have concerns about your credit rating and purchases on a revolving account, you should pay cash and only charge a small item to the account, such as an Internet bill, to keep the account active. Also, you should only make a purchase with the intent to pay off the bill before the next billing cycle starts.