Credit Repair

How Making Just The Minimum Payments On Your Credit Cards Results In A Reduced FICO Score?

The problem with credit card debts is that they keep on growing very fast because of the high rate of interest charged on it. If you are just making the minimum payments, the outstanding balances on your credit cards will keep on increasing rapidly with every passing month, which will eventually result in a reduced FICO score. In fact, it should not be an exaggeration to say that credit card companies offer the convenience of making just the minimum payments to consumers with the only objective to push them into debts so that they can charge them more.

It Helps You Avoid Defaulting On The Debt But The Help Comes At A High Price

The concept of minimum payments on credit cards is often advertised as a tool for consumers that can help them avoid defaulting on their debts. It means when you pay a certain amount of money every month (even if it is less than the total outstanding dues in your name), you will officially be considered to be current with your debts. But, in reality, you are obviously still behind your payments and the outstanding balances are only getting more time and space to get bigger. Many people think that it is just fine to avoid the actual debt by making the minimum payments every month, but this is not the case. There is a limit to how long you can avoid your debts. You will soon reach a point where you will have no option but to pay off all your outstanding balances, and then, it will almost become impossible for you to make the repayment in full. The already reduced FICO score will keep on reducing with every passing month and soon it will get damaged so horribly that it will almost be impossible to reapir your credit score.

Making The Minimum Payments Does Not Make Your Debt Affordable

The convenience of making just the minimum payments may get you a feeling in the beginning that it actually makes credit card debts quite “affordable”, but very soon you will start to realize that your debts actually become unaffordable if you avail this convenience for a long time and never care to pay off your outstanding balances in full.

30% Of Your Fico Score Depends On The Total Outstanding Balance On Your Debts

Since 30% of your score depends on how much outstanding debt you owe, a higher balance on your debts will result in a significantly reduced FICO score. The only way to improve your score in such cases is to start paying off your debts. The faster the outstanding balances reduce, the faster your credit score will increase. If you really care about having a healthy credit score, you must always do your best to keep the outstanding balances low on your credit cards. A credit card with zero outstanding balance can boost your credit worthiness.

Effects On Payment History

Many people think that making just the minimum payments actually add negative payment history records on the credit reports and that is the reason why the FICO score decreases. Though it is true that 35% of your credit score depends on your payment history, it is important to note that when you make the minimum payment every month, you are officially considered to be current with your debt accounts. Therefore, the payment history records remains unaffected because of it, at least in the beginning. When the debts become bigger and you start making “official defaults” (which is very much likely if you avoid your debts for a long time), it will definitely have adverse effects on your payment history also, which will further damage your credit worthiness.

Overall, if you do not want a reduced FICO score on your credit report, you must avoid making the minimum payment and try to pay off the outstanding balances on your credit card debts in full every month.


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Posted in Credit Repair, Credit Score | 1 Comment »

One Response to “How Making Just The Minimum Payments On Your Credit Cards Results In A Reduced FICO Score?”

  1. macc says:

    A good knowledgeable article on the payment tricks for credit cards and the results thereafter if you choose to revolve your credit by paying a minimum due amount. This practice will increase your debt in manifolds and in turn lower your credit ratings. It has been wrongly publicized that you will not be on default by paying a minimum due amount where as this step is forwarding you in to well of credit and one day a stage will be reached when your debts will be so much and you have to pay the entire amount. Paying a minimum amount every month is just taking you away to afford a loan as it will get increased every passing month. Your credit worthiness or in other term you credit rating depends on your total outstanding amount every month and when it will be increasing by each month your rating will be lowered. A good credit rating can be had only by lowering or paying your credit card dues in full. Your rating very well depends on your ways of making payments .A good payment history will surely increase your credit worthiness. So always try to make the payments in full amount.

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