Does Not Using My Credit Card Affect My Credit Score?

Overview Nowadays, credit cards abound on the market and are the most practical approach for making transactions. Credit cards, as we all know, provide a lot of convenience and, if used sensibly, may help develop your credit history; but, many people wonder whether keeping a credit card inactive might lower their credit score. This article will investigate if not using a credit card has an effect on the credit score and actions to be followed should one not plan to use the card.

The Calculation of Credit Scores Before exploring how inactive cards could affect a credit score, one must first be aware of what makes up that number. The two main credit scores are VantageScore and FICO. Though the precise formulations are private, some important considerations are included.

• Credit history – How one manages to pay his or her debts. This usually includes 35% of a score.
• Credit utilization ratio – The amount of credit that is currently being used in proportion to the total amount of credit that is available. Around 30%.
• Credit utilization – The amount of credit used as a portion of the amount of credit available. Around 15%.
• New credit applications – This is the opening of new credits which is an aspect of risk. Around 10%.
• Credit utilization - Paying your credit card bill in full every month and maintaining an installment loan. About 10%.

Other factors like the payment history and length of credit history often weigh more for higher credit scores.

Is It Possible to Negatively Affect Your Credit Score for Not Using a Credit Card? The short answer is mostly no. It is unwise to close an existing credit card, even if you are not actively using it, as this should not harm your credit score. Here’s why:

• The timely payments are not an issue – If there are no payments due, the payment history also remains untouched.
• Balances do not change - If no balance is present, the utilization ratio will remain at 0% instead of increasing. This helps a score.
• Length of history remains - Credit is created for as long as the open account remains open.

The larger risk to your score would be that of closing the credit cards that you do not use, not the fact that you do not use them. This can help reduce your overall credit utilization ratio because it decreases your total available credit limit. Closing the unused card also brings down the total length of your credit history which is not good for your credit score.

Other possible consequences of inoperative credit cards While not using a credit card avoids hurting your credit score, there are some other drawbacks to consider.

• Annual fees still apply – If you have cards that come with annual fees, you will still be required to pay them. These can accumulate over time.
• The penalty costs apply where used – Interest rates on idle cards usually rise. This means that having a balance is expensive if one uses the card and ends up having an emergency.
• Lack of accumulation of reward points – Undoubtedly, one stands to lose the ability to accumulate any form of reward points by not applying for the rewards credit cards.
• Possible account closure by the issuer – If the account is inactive for as long as six months up to two years, the card issuer may close it. It can also then reduce your total available credit and length of credit history as explained above.

If you are not using certain credit cards, the following are some tips: If you have no plans for one or more of your credit cards, some options to mitigate risks include.

1. Utilize the card sparingly every 6-12 months - Pay for a small regularly occurring expense like Netflix. Oh yeah, just link it to your credit card and it will be paid in full every time. This demonstrates that the card is active.
2. Request from the issuer for a product change – Try to know if they can switch to a new card. This can be a lower annual fee or other rewards which you might benefit from.
3. Call and request a lower APR or no fees – There is no harm in asking. The issuer would often rather have you than not have you.
4. Newer cards first – also, if you are going to close a card, it should be the closer one of the first year. They have a lesser effect on the length segment of your history.

The Bottom Line Just not using the credit card in your pocket does not in itself harm the credit score you have gained. Some of these include payment history, length of credit history, and credit utilization can be left unchanged. However, you don’t get to enjoy any of the benefits such as rewards that are perhaps associated with your productivity. In the long run, having completely inactive cards leads to such risks as getting charged with fees, penalty rates, or even account termination. Avoiding these drawbacks is possible by using the card lightly or by converting it to more useful cards. Thus, the absence of short-term harm does not necessarily mean that it is ideal to retain unused credit cards indefinitely.

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