Does Not Using Your Credit Card Affect Your Credit Score?

How Not Using Your Credit Card Can Affect Your Credit Score

It might seem counterintuitive, but letting your credit card gather dust can negatively impact your credit score. Inactivity can lead to account closure, which affects key factors in your credit report.

1. Initial Inactivity: Your credit card account becomes dormant after several months to a year of no use. Initially, this has no direct effect on your credit score.
2. Issuer-Initiated Closure: To manage risk and costs, your card issuer may close the inactive account, sometimes without prior warning. This is where the potential damage begins.
3. Increased Credit Utilization: The closure reduces your total available credit. If you have balances on other cards, your credit utilization ratio—the amount you owe versus your total limit—will increase, potentially lowering your score.
4. Shortened Credit History: If the closed card was one of your older accounts, its closure can reduce the average age of your credit history, another important factor that credit scoring models consider.

How Much Will Not Using Your Credit Card Affect Your Credit Score?

While it might seem harmless, letting a credit card gather dust can have unintended consequences for your credit score. Here are a few key factors to consider before you stop using your card completely.

• Account closure due to inactivity. Lenders may close accounts that have been dormant for a long time. This can lower the average age of your credit history, which could negatively impact your score.
• Impact on credit utilization. An unused card keeps your credit utilization low. However, if the issuer closes it, your total available credit decreases, which could raise your overall utilization ratio and lower your score.

How You Can Avoid Having Not Using Your Credit Card Affect Your Credit Score

Set Up a Small Recurring Payment

A simple way to keep an account active is to link it to a small, recurring charge, like a streaming service or monthly subscription. Set up automatic payments from your bank account to pay the balance in full each month, ensuring activity without accumulating interest.

Make Occasional Planned Purchases

Alternatively, use the card for a minor purchase every few months. Buying a tank of gas or a cup of coffee is enough to register activity. This demonstrates to the card issuer that the account is still in use, reducing the risk of closure due to inactivity.

Ways to Improve Your Credit Score

Your credit score is dynamic, not set in stone, meaning it's always possible to improve your credit score with consistent, positive financial habits. Most people can see meaningful changes within just a few months by taking a few key steps.

• Establish automatic bill payments. Your payment history is the most significant factor in your score, so setting up automatic payments ensures you never miss a due date.
• Reduce your credit utilization ratio. Aim to keep your balance below 30% of your total credit limit, as high utilization can significantly lower your score.
• Monitor your credit reports. Regularly check your reports from all three major bureaus to identify and dispute any inaccuracies or signs of fraud.
• Become an authorized user. Being added to an account with a long, positive payment history can help build your own credit file, provided the account reports to the credit bureaus.
• Limit hard inquiries. Avoid applying for too much new credit in a short period, and use prequalification tools when possible to shop for rates without impacting your score.
• Diversify your credit mix. Lenders like to see that you can responsibly manage different types of credit, such as credit cards and installment loans.

The Bottom Line

While not using your credit card won't directly lower your score, inactivity can lead to account closure. This may increase your credit utilization ratio and reduce your average account age.

Frequently Asked Questions

Will my credit card be closed if I don't use it?

Yes, issuers can close accounts for inactivity. This can negatively impact your score by reducing your available credit and shortening the average age of your credit history.

Does closing an unused credit card hurt my credit score?

It can. Closing a card increases your credit utilization ratio and can lower the average age of your accounts, both of which are important factors in your score.

What's the easiest way to keep a credit card active?

Use it for a small, recurring purchase, like a subscription, and set up automatic payments. This keeps the account active without requiring you to carry the card.