2. Making Only the Minimum Payment Each Month
Minimum payments are designed to keep accounts technically current, not to help consumers become debt-free or build strong credit profiles. While making the minimum avoids late payment penalties, research shows that people who rely on minimum payments often remain in debt for years, paying thousands in interest.
From a credit scoring perspective, minimum payments keep balances high. High balances increase utilization, which lowers scores. Over time, lenders may interpret consistent minimum payments as a sign that the borrower lacks flexibility or is struggling to reduce debt.
There is also a behavioral impact. Minimum payments create the illusion that debt is manageable, encouraging continued spending. This cycle keeps utilization elevated and limits score improvement. Credit bureaus don’t see how much interest you’re paying, but they do see long-term high balances — and that’s a red flag.
Another overlooked factor is lender risk assessment beyond the score itself. Banks often use internal data to evaluate customers. Someone who consistently pays only the minimum may be offered lower credit limits, fewer promotions, or higher interest rates, which indirectly keeps credit growth slow.
Paying more than the minimum even a modest extra amount reduces principal faster and improves utilization over time. Research shows that people who reduce balances steadily tend to see gradual score increases within months, not years. The key is consistency. Paying down debt sends a signal that you’re in control, not just keeping up.
