Your credit score is unaffected by not using your credit card. However, your issuer could ultimately shut the account as a result of inactivity, which might harm your score by reducing the total amount of credit you have access to. It's crucial not to register for accounts you don't actually need because of this.
Some cards will close your account if you never use them. It's best practice to charge something occasionally and pay off immediately so that doesn't happen. You want to make sure your oldest card never gets closed as that will impact your credit score by lowering your ``age of credit'' and ``available credit''.
Ideally, you'll close your credit card account when it's in good standing, which means you have no late or missed payments in your payment history. A closed account in good standing stays on your credit report for 10 years, and those on-time payments continue to positively impact your credit score during that time.
If you don't use a credit card for a year or more, the issuer may decide to close the account. In fact, inactivity is one of the most common reasons for account cancellations. When your account is idle, the card issuer makes no money from transaction fees paid by merchants or from interest if you carry a balance.
If you haven't used a card for a long period, it generally will not hurt your credit score. However, if a lender notices your inactivity and decides to close the account, it can cause your score to slip.
Your credit card could be closed due to inactivity
Credit card companies often review account activity and may close accounts that haven't been used for an extended period. If a company closes your credit card account due to inactivity, it may impact your credit score, according to FICO1.
Closing a credit card with a zero balance may increase your credit utilization ratio and potentially drop your credit score. In certain scenarios, it may make sense to keep open a credit card with no balance. Other times, it may be better to close the credit card for your financial well-being.
Closing a credit card can hurt your credit, especially if it's a card you've had for years. An account closure can cause a temporary hit to your credit by increasing your credit utilization, lowering your average age of accounts and possibly limiting your credit mix.
Before you run out and charge something just to keep your account active, however, you should know that it usually takes a year or more of inactivity for the issuer to close the card. It's also important to note that you might not get any warning that your issuer is closing your account.
Generally, a zero balance can help your credit score if you're consistently using your credit card and paying off the statement balance, at least, in full every month. Lenders see somebody who is using their credit cards responsibly, which means actually charging things to it and then paying for those purchases.
There are some differences around how the various data elements on a credit report factor into the score calculations. Although credit scoring models vary, generally, credit scores from 660 to 724 are considered good; 725 to 759 are considered very good; and 760 and up are considered excellent.
In general, you should use your credit card at least once a quarter (every three months) to keep the card open and active. The answer to just how often you should use your card to maintain a good score comes down to your credit utilization and on-time balance payments, rather than how many transactions you have.
While you don't want to carry any balance, make sure you're still using your credit card regularly — at least on small charges. Otherwise, your credit card issuer can potentially close your account after months or years of inactivity.
It may be possible to reopen a closed credit card. In general, it's more likely to be an option if the card was closed for a minor reason, such as an inactivity, or if you closed it yourself. If your card was closed due to missed payments, on the other hand, your lender may not be willing to reinstate it.
You still owe any annual fees
Your account is opened when your application is approved, so even if you don't activate the credit card you receive in the mail, you still have an open account and you'll still need to pay the annual fee associated with it. This applies to secured credit cards that come with fees as well.
If you close one card with a $5,000 limit, your available credit drops to $5,000. As a result, your utilization ratio jumps to 40 percent, even though you haven't taken on any additional debt. Higher credit utilization can negatively affect your credit score, as it's a significant factor in credit scoring models.
It's generally recommended that you have two to three credit card accounts at a time, in addition to other types of credit. Remember that your total available credit and your debt to credit ratio can impact your credit scores. If you have more than three credit cards, it may be hard to keep track of monthly payments.
Your credit utilization ratio goes up
By closing a credit card account with zero balance, you're removing all of that card's available balance from the ratio, in turn, increasing your utilization percentage. The higher your balance-to-limit ratio, the more it can hurt your credit.
Carrying a balance does not help your credit score, so it's always best to pay your balance in full each month. The impact of not paying in full each month depends on how large of a balance you're carrying compared to your credit limit.
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.
High annual fees or poor customer service
Not all credit cards are a great match, and there are some valid reasons for wanting to close out your account. For example, If the card carries an annual fee you don't think is worth it, you might want to cancel. You also might want to if customer service is consistently bad.
If you don't use your card, your credit card issuer may lower your credit limit or close your account due to inactivity. Closing a credit card account can affect your credit scores by decreasing your available credit and increasing your credit utilization ratio.
Using more of your credit card balance than usual — even if you pay on time — can reduce your score until a new, lower balance is reported the following month. Closed accounts and lower credit limits can also result in lower scores even if your payment behavior has not changed.
Using an unused credit card for small purchases every few months can help keep the account active and prevent the issuer from closing it due to inactivity.