Does having credit cards with a zero-balance hurt your credit score?

A zero-balance credit card can impact your credit score, and here’s why.

Too many financial consumers don’t understand their credit scores, and that’s a scenario that can lead to negative outcomes.

Data from shows that 40% of Americans don’t know their credit scores. Additionally, a third of U.S. adults didn’t know what credit score level was necessary for securing a good mortgage, auto, or personal loan.

One area where credit scores are particularly vexing for consumers is when zero balances on credit cards come into play. Here’s everything you need to know about how a zero balance impacts credit.

How having a zero balance affects your credit score

At first look, one might think fully paying a card balance down to zero dollars would be a net positive. That, however, may not be the case with credit scores, which places a priority on how credit cards are used by financial consumers.

“A zero balance means an inactive account, which helps your score in the short run but poses risks long-term for your credit health,” said Kevin Haney, a former executive with Experian and president of Growing Family Benefits in East Brunswick, N.J. A zero balance lowers your revolving utilization ratio initially, which the scores use to identity consumers on the brink of financial trouble.

“People about to become delinquent often charge their cards to the limit, so lowering this fraction shows stability,” Haney says. “However, banks tend to respond to inactive accounts in ways that could hurt your score down the road. They might lower the limit or close the account.”

To find the best credit card that will get you on the path to a great credit score, visit an online marketplace like Credible, where users can compare all kinds of credit cards within minutes.


What is credit utilization?

Credit utilization is an important calculation tool for credit scoring agencies and a big metric for lenders and creditors. For consumers, that means hitting the credit utilization “sweet spot.”

“With a weighting of 30%, your credit utilization ratio is a key factor used to calculate your credit score,” said Richard Best, a credit specialist at, a consumer discount financial spending platform. “Generally, your credit score improves when your credit utilization is less than 30% of your total available. The lower the better.”

Credit Utilization is one of several key factors credit agencies use when calculating consumer credit scores. Best notes the following factors, too.

Your payment history, which includes your on-time or delinquent payment record, accounts for 35% of your score.

The length of your credit history accounts for 15% of your score. The longer your credit history, the better.

Adding new credit can reduce your score, although the weighting is only 10%.

Your mix of credit can also affect your score. Heavy reliance on consumer-finance debt can lower your score. This factor weighs in at 10%.

Credit utilization accounts for 30% of an individual’s credit score and an individual’s credit score depends heavily on where his or her credit utilization stands.

“Having a zero balance on a credit card can help and hurt your credit score – depending on the situation,” said Jonathan Hess, founder of Hess Financial Coaching, a personal financial services and training company. “Having a zero balance helps to lower your overall utilization rate; however, if you leave a card with a zero balance for too long, the issuer may close your account, which would negatively affect your score by reducing your average age of accounts.”


How to boost your credit score

Consumers can take specific steps to improve their credit utilization ratio (and improve their zero-balance credit card picture) and strengthen their credit score overall. These five tips can get credit consumers on the right track.

Make periodic, small purchases on credit cards

Pay bills on time

Always know your credit score

Do some credit housecleaning

1. Make periodic, small purchases on credit cards: Instead of allowing a credit card balance to fall all the way to zero, try making small, periodic payments to boost credit utilization ratios. “That can help build your payment history, so long as you’re paying off the full balance each month and ensuring you’re keeping track of your credit utilization and cash inflows,” said Angelo Alessio, vice president of Product at Harvest

If you’re in the market for a new credit card, you can use Credible to see what types of cards are available to borrowers with your credit score.

2. Pay bills on time: On-time payments are the single best method for improving your credit score. “Maintaining a low credit card balance and overall debt-to-income (DTI) ratio is also important in ensuring you have a high credit score,” Alessio said.

3. Always know your credit score: You can’t improve your score if you don’t know what it is, and you don’t track its direction. “By law, you can receive a free credit report from each of the major credit reporting agencies once a year,” Best said. “You can also order free credit reports from”


4. Do some credit housecleaning: The vast majority of credit reports contain errors, like misapplied payments, incorrect credit limits, and even wrong Social Security numbers. Any of those errors can drag credit scores down. “By law, the credit bureaus must correct errors,” Best added. “Once corrected, you can see your score improve instantly.”

5. Build your credit history: The biggest weighting of credit score health is the use of credit. “You must be able to demonstrate a constant record of on-time payments,” Best said. “To do that, use your credit cards regularly, but be sure to pay off the balances monthly.”

This article was first published on the Fox News Business website.

The article has been edited for clarity.

Winston Rowe and Associates a national consulting firm

How To Calculate Loan To Cost For A Commercial Mortgage

Calculating loan to cost ratios for commercial real estate loans.

Loan to cost (LTC) compares the financing amount of a commercial real estate project to its cost. LTC is calculated as the loan amount divided by the construction cost.

Some examples of costs include purchase price, materials, labor, and insurance costs.

Other costs, depending on the scope of the project could include soft costs, like architectural plans and impact fees or even finance costs like interest and fees.

The formula to calculate LTC is as follows:

LTC = Loan Amount / Cost

A higher LTC result in higher risk for the lender than would a lower LTC. Since lending is risk based, higher leverage loans call for more conservative pricing and terms.

Commercial property loans with a lower LTC command more competitive structure with lower rates and more favorable loan terms.

The loan to cost ratio is essential in determining the qualification for a loan, other factors lenders pay close attention to include location, borrower financial strength, pro forma income and expenses, and asset class.

Winston Rowe and Associates prepared this article. They are a national consulting firm specializing in the due diligence and preparation of commercial loan proposals to submit to their network of capital sources.

They also have a free book “Commercial Real Estate Finance” available on their website.

You can contact them at 248-246-2243 or visit them online at

Commercial Real Estate Loans – Due Diligence 101

Real Estate Due Diligence Lenders making commercial real estate loans in the commercial real estate market face harsh competition in terms and pricing and often have to make significant concessions to borrowers.

Given the highly competitive market, loan officers may end up focusing on doing whatever it takes to get the loan in the door, and may inadvertently overlook pertinent details in connection with the borrower, the guarantor or the collateral.

This oversight may not be discovered until after the loan has been approved by the lender and a loan commitment letter has been provided to a borrower, which could leave the lender in a precarious position. In order to reduce the lender’s risk of discovering problems after the loan has been approved, lenders should take steps to obtain and review potential borrowers’ due diligence documents before loans are approved.

At a minimum, lenders should know the following information:

Is the borrower an individual, a trust, a partnership, a limited liability company or a corporation?

Who are the trustees, beneficiaries, partners (limited or general), members, managers, officers or directors of the borrower?

If borrower is not an individual, has the borrower provided copies of the trust agreement, partnership agreement, operating agreement or by-laws for each layer of the borrower entity?

Has lender run credit checks and UCC/judgment/pending litigation/bankruptcy and tax lien searches on the borrower and guarantor?

What financial obligations do the borrower and/or guarantor have to other lenders?

How is title to the real estate collateral held, and what is the intended use of the real estate collateral?

What property interest does borrower own or intend to acquire?

What is the borrower’s intended use of the real estate collateral?

Are there any physical limitations to borrower’s intended use of the real estate collateral?

Are there any legal restrictions to borrower’s intended use of the real estate collateral?

What is the estimated value of the real estate collateral?

Are there encroachments, encumbrances, environmental issues that affect the use or value of the real estate collateral?

Are there any leases in effect, and if so, what are the terms of those leases?

Does the income from the real estate collateral cover the monthly debt service?

Does the borrower plan construction with all or a portion of the loan proceeds?

What is the estimated value of the real estate collateral post-improvements?

How will loan proceeds be disbursed (i.e., through a construction escrow at a title company, or directly to the general contractor and subcontractors in exchange for lien waivers)?

Does the borrower have a budget for the proposed construction?

Has the borrower entered into any contract with an architect or general contractor regarding the proposed construction?

What type of additional collateral is the borrower and/or guarantor offering as security for the loan?

Business accounts, operating accounts, accounts receivables, stock certificates, etc.?

Who owns title to the additional collateral? Is it owned jointly with another person or entity?

Does the borrower or guarantor actually own the additional collateral or does the borrower or guarantor merely lease the collateral?

How will the lender properly secure and perfect its interest in the collateral?

When lenders take the time to ask questions and obtain documentation regarding the borrower, the guarantors and the proposed collateral prior to approving commercial financing, this puts lenders in the best position to evaluate the proposed transaction and to properly secure the collateral for the loan.

“An ounce of prevention is worth a pound of cure.” -Benjamin Franklin

Winston Rowe and Associates No Upfront Fee Commercial Loans

Supporting Document List For A Commercial Mortgage Purchase

This is the list of supporting documents for the purchase financing of a proposed commercial real estate loan.  

Upon completion of Winston Rowe & Associates initial due diligence review. The financing proposal will be submitted to One or more of our capital sources for consideration and possible financing.

You will be required to complete additional capital sources [lender] forms, applications, documents or additional supporting documents not listed here.

Please review our website concerning submission procedures, policies and services at

Purchase Commercial Loan General Submission Procedures: 

Winston Rowe & Associates and its capital source(s) utilizes a global approach during the due diligence investigation [review].

All files must be submitted electronically via email as an attachment. Named properly.

Incomplete loan files will not be processed.

If there are material misrepresentations made by the client or the client’s representative, the transaction will be terminated.

Borrowers must make themselves available to underwriting to answer questions pursuant to the material facts of the transaction(s).

Document files need to be properly named, with headers within each document identifying contents, date created, property and borrower.

The nomenclature to use for files is [property name, document type, date submitted] for example Property Name – Document Type – Date 

Business Financial Supporting Documents: 

Bank Statements for Proof and Source of Down Payment Funds

Business Profit & Loss 3 Years

Income & Expense Statement 3 Years

36 Months Detailed Business Bank Statements

Debt Schedule

Property Supporting Documents: 

Purchase agreement

Schedule of tenant leases 

Copies of tenant leases 

Property Title

Schedule of Units with Square Foot Per Unit Excel Format 

Schedule of all major improvements to be made with cost breakdown to subject property 

Exterior Photos of Subject Property Photos of Parking Lot, Street view 

Interior Photos of Subject Property

Subject Property Tax Documents with Amounts

Insurance Binder with Annual Costs

12 Months Utilities

Property Income & Expense Statement YTD 12 Months Trailing

Use of Proceeds in an Excel Format for Improvements to Property

Guarantor Supporting Documents: 

4506 (T) executed 

Tri merge credit report from for all investors

Government issued photo ID copy – Front and Back 

Full detail personal and business bank statements YTD for 36 Months YTD

Personal financial statement for all guarantors and investors YTD for 12 Months YTD

3 Years Federal and State Income Tax Returns for all Guarantors and Investors

Articles of Incorporation 

Schedule of Real Estate Owned

Schedule of Corporations / Businesses Owned

Debt Schedule

Winston Rowe & Associates Forms:

You are required to complete the following forms.

This was sent to you as an excel workbook.

Personal Financial Statement

Income & Expense Statement

Real Estate Owned

Businesses / Corporations Owned

Rent Roll

Schedule of Tenant Leases

Improvement to Subject Property

Business Debts to be Consolidated

Debt Schedule