Does having unused credit cards help your credit score?

The Surprising Power of Unused Credit Cards: How They Boost Your Score

It's tempting to close an unused credit card, especially if you find yourself paying an annual fee. After all, why keep an account you're not using? However, the truth is that even dormant credit cards can play a crucial role in boosting your credit score.

Here's how:

1. Longer Credit History: Your credit history is a key factor in determining your credit score. The longer your credit history, the better your score tends to be. Even if you haven't used a credit card in years, keeping it open adds to your credit history, demonstrating your responsible credit management over time.

2. Lower Credit Utilization: Credit utilization refers to the amount of credit you're currently using compared to your available credit limit. Having multiple credit cards, even if unused, increases your total credit limit, potentially lowering your utilization ratio. This is a significant factor in your credit score, as a lower utilization ratio generally reflects responsible borrowing habits.

3. A Safety Net: Life can be unpredictable. Unexpected expenses can pop up, requiring access to credit. By keeping a few unused credit cards open, you have a safety net if an emergency arises. This can be especially helpful if you've been recently approved for a new credit card and haven't had time to build up a solid history.

However, there are some caveats:

• Annual Fees: If you're paying an annual fee for an unused card, it may make sense to close it if the cost outweighs the benefits. Consider contacting your issuer to negotiate a lower fee or request a fee waiver.
• Credit Limit Impact: Closing unused cards can potentially affect your credit limit, leading to a higher credit utilization ratio. This could temporarily impact your score.

In conclusion, while an unused credit card may feel like a forgotten relic, it can actually contribute to your financial well-being. By keeping your credit history long, credit utilization low, and having a safety net in place, unused credit cards can be a valuable asset in your journey to a healthy credit score.

Before making any decisions about closing your unused credit cards, it's always a good idea to consult with a financial advisor or credit expert to determine the best course of action for your specific situation.