Around 40% of Americans have no idea how their credit score gets calculated. Are you one of them?

Credit score calculation is complex and fluid. It’s no surprise that millions of Americans have questions. Most of us know that paying our bills on time has some effect. But, is making a minimum payment good or bad for your score?

You will find some great tips to pay off your debt but right now we’re here to give you the facts and empower you to boost your score, which is certainly not by making minimum payments.

 Read on to learn everything you need to know about minimum payments and your score.

Is Making a Minimum Payment Bad For my Score?

If you don’t have a clear understanding of credit cards before you get one, then you’re likely going to have a bad time. Credit card companies prey on individuals who aren’t debt-savvy.

Many lenders tell you you’ll only have to pay a small fixed amount each month. You get the top-dollar product you want without having to wait! Sounds great, right?

As the old adage goes, if it sounds too good to be true, then it likely is. Making minimum payments every month will cause you to be in debt longer. Meanwhile, your lender is making bank off of your interest payments! In the long run, you’ll end up paying way more than you bargained for.

Despite that, making minimum payments doesn’t impact your score that much. What matters most is your credit to debt ratio, which changes based on your payments. Learn more about that below.

Credit to Debt Ratio: A Balancing Act

Your credit to debt ratio makes up a whopping 30% of your score. That means if you’re using a lot of your available credit, your score will drop.

Your score won’t improve much until you can pay off some of your debt. If you’re in this situation then making minimum payments can hurt your score. Paying more will help balance your ratio out.

In an ideal situation, you want to use about 30% of your available credit at once.

If you’re looking to boost your credit to debt ratio but have poor credit, you do have options. Research credit cards for poor credit and then be smart about using them.

What Should I Do If I Can’t Pay?

If you can’t even make your minimum payment, then you need to act right away. Your payment history makes up about 35% of your credit score. Late payments can be a major blow.

Instead, reach out to your lender. They will almost always work with you through a tough situation. So long as you’re on good terms, they won’t report the ding to credit agencies.

Start Boosting Your Score Today

Making a minimum payment feels like your only option sometimes. If you’re struggling, then don’t feel ashamed to pay what you can. It’s far better to reach out to your lender than to fail to pay at all.

There are so many factors that come into play when it comes to your credit score. Our money blog section has all the latest details to help keep you informed. Don’t miss our article on six ways to improve finances for more great advice!