Does my credit score go up if I don't use my credit card?

The Credit Card Conundrum: Inactivity and Your Credit Score

We’ve all been there. You open a credit card, maybe for a special offer or a specific purchase, and then… it ends up tucked away in a drawer, rarely (if ever) seeing the light of day. You might think, “Hey, no debt, no problem! My credit score must be improving by just leaving it alone.” But is that actually the case? The truth is a little more nuanced, and surprisingly, leaving a credit card inactive can actually hurt your credit score.

So, does your credit score go up if you don’t use your credit card? The short answer is: probably not, and it might even go down. Here’s why:

The Perils of Inactivity:

Leaving a credit card untouched for a prolonged period opens the door to two potential pitfalls that can negatively impact your credit health.

• Issuer Account Closure: Credit card companies are businesses, and they want you to use their products. If they see a card sitting dormant for an extended period (typically 12-24 months, but it varies by issuer), they might close the account due to inactivity. They simply don’t want to bear the cost of maintaining an account that isn’t generating revenue.

• The Credit Score Fallout: This is where it gets tricky. Closing an inactive account can have several negative consequences for your credit score:

  • Shorter Credit History: The length of your credit history is a key factor in your credit score. A closed account means a reduction in the average age of your accounts, potentially lowering your score. Even if the account was old and well-established, its removal from your credit history can still have a negative impact.

  • Reduced Credit Utilization Ratio: Your credit utilization ratio (the amount of credit you’re using compared to your total available credit) is another crucial factor. Closing an inactive account reduces your overall available credit. If you have balances on other cards, this could significantly increase your credit utilization ratio, which is generally recommended to stay below 30%. A higher utilization ratio signals to lenders that you might be overextended.

  • Impact on Credit Mix: While not as critical as payment history and credit utilization, having a diverse mix of credit accounts (e.g., credit cards, installment loans) can positively influence your score. Closing a credit card reduces this mix, although the impact is typically minor.

The Solution: Strategic Usage

So, how do you avoid these pitfalls without accumulating unnecessary debt? The key is strategic, minimal usage.

• Small, Recurring Purchases: The simplest solution is to use the card for small, recurring purchases that you would normally make anyway, like a streaming service subscription or a weekly coffee.

• Automatic Payments: Set up automatic payments to pay off the balance in full each month. This ensures you avoid interest charges and keeps your utilization ratio low.

• Check Your Account Regularly: Monitor your online account to ensure the card remains active and that your charges are accurate.

Before You Act:

Before you start using a dormant credit card, consider these factors:

• Annual Fees: If the card has an annual fee, weigh the cost of keeping it open against the potential benefits to your credit score. It might be more economical to close the account and focus on managing other credit cards responsibly.

• Rewards and Benefits: If the card offers valuable rewards or benefits that you can actually use, keeping it active might be worthwhile.

• Credit Score Monitoring: Keep an eye on your credit score to track the impact of your actions. Free credit monitoring services are readily available online.

The Takeaway:

Leaving a credit card inactive might seem like a responsible way to avoid debt, but it can ultimately harm your credit score. By using your cards strategically and responsibly, you can maintain a healthy credit history, avoid unnecessary fees, and keep your credit score on the right track. Remember, responsible credit management is a marathon, not a sprint, and consistent, mindful practices are key to long-term success.