If you don’t use your credit card, your card issuer can close or reduce your credit limit. Both actions have the potential to lower your credit score.
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Your credit card issuer may close or restrict your credit line if you stop making new purchases with it, which could have an effect on your credit score. Your credit card may be closed or restricted for inactivity, both of which can hurt your credit score.
The Lowdown on Inactive Cards and Your Credit Score
We all have those credit cards tucked away in our wallets that we rarely if ever, use. Maybe it’s an old rewards card that’s been replaced by a newer, shinier model or perhaps it’s a store card from a retailer you no longer frequent. Whatever the reason, neglecting your credit cards can have unintended consequences for your credit score.
The Inactivity Trap: What Happens When You Stop Using Your Card
While there’s no harm in having a few unused credit cards lying dormant, neglecting them for extended periods can trigger inactivity. This, in turn, can lead to a domino effect of negative impacts on your credit score.
1. Card Closure: The Grim Reaper of Credit History
Credit card issuers aren’t thrilled about dormant cards. If you haven’t used your card in a while, they might decide to close the account altogether. This can be a major blow to your credit score, especially if the card has been open for a long time.
2 Credit Utilization Woes: The Balancing Act of Available Credit
Your credit utilization ratio which measures the percentage of your available credit that you’re actually using, plays a crucial role in your credit score. Closing an unused card reduces your total available credit, potentially increasing your utilization ratio and dinging your score.
3. Length of Credit History: The Time Machine of Creditworthiness
The length of your credit history is a significant factor in your credit score. Closing an old card can shorten your credit history, making you appear less creditworthy in the eyes of lenders.
Should You Cancel That Unused Card?
Before you reach for the scissors and snip your unused card in half, consider the potential consequences. Canceling a card can negatively impact your credit score, especially if it’s an older card with a long history.
Keeping Your Cards Active: A Simple Strategy for a Healthy Score
Maintaining activity on your unused cards is a simple yet effective way to keep your credit score in tip-top shape. Here are a few tips:
- Make small, regular purchases: Use your card for small, recurring expenses like streaming subscriptions or monthly bills.
- Set up automatic payments: Automate payments for recurring bills to ensure consistent card usage.
- Transfer balances: If you have a high-interest card, consider transferring the balance to a card with a lower rate.
The Bottom Line: Unused Cards Don’t Have to Hurt Your Score
By keeping your unused credit cards active, you can avoid the negative impacts on your credit score and maintain a healthy financial profile. Remember, a little bit of activity goes a long way in the world of credit.
Your Credit Score May Be Affected
Although you may dismiss your credit card issuer’s decision to close an account you weren’t using anyway, you shouldn’t disregard it because it could have a big impact on your finances. Your credit score may suffer the effects of a closed credit card:
- Your credit history length may shorten. The length of time you have had credit is one factor used to determine part of your credit score. Your total credit “age,” which influences prospective lenders’ assessment of your suitability, can be lowered by closing a credit account, particularly one that has been open for a long time.
- Your credit utilization rate may rise. Your credit utilization, which is the second-most significant factor in your credit score, indicates what proportion of your available credit you are actually using. Your credit scores may suffer if your card issuer suddenly closes your account, which will likely result in an increase in your credit utilization rate. It is advisable to keep your credit utilization below 30%; individuals with the highest credit scores usually have utilization of 10% or less.
- Your credit mix may be affected. Your credit mix is the variety of credit that you have recorded, ranging from revolving credit accounts like credit cards to installment credit accounts like auto and personal loans. Having some diversity in your credit mix can help your credit score because it demonstrates your ability to handle a range of accounts responsibly. Your credit score may suffer if your credit card issuer cancels the only revolving credit account you own.
What to Expect When You Don’t Use a Credit Card
When you don’t swipe for a while, you can anticipate that your credit card company will (eventually) either reduce your credit limit or close your account. Your card issuer decides how long to suspend or cancel your credit line, and they are not required to notify you beforehand.
Why you should CANCEL your old credit cards
Can a unused credit card account boost your credit score?
Conversely, negligence with an open account could lead to financial turmoil because your credit score may decrease with card inactivity, so preparing yourself on how to maintain your unused card accounts is a must. Keeping an old credit account active may seem like a meaningless task, but doing so can boost your credit score for several reasons.
Is it safe to close an unused credit card?
An unused card with a high annual fee that you can’t afford is also generally safe to close, as is a newly opened account that you don’t use. Cancelling it will have less of a negative impact on your credit score than closing an older account.
Should I cancel my unused credit card?
If an unused credit card tempts you to unnecessarily spend or has an annual fee, you may be better off canceling the account. In some cases, you might be able to keep an account open without the cost by switching to a no-annual-fee version of the unused card.
Should you keep unused credit card accounts open?
In most situations, it’s better to keep unused credit card accounts open, as closing credit accounts can have a negative impact on your credit score.