How Credit Card Inactivity Can Affect Your Credit Score

Your credit score plays a big role in your home purchase and how much it costs. That being said, there are numerous factors that can impact your rating.

To ensure that it stays as strong as possible, it’s suggested that you keep debt at reasonable levels, pay all of your bills early or on time and refrain from opening or closing too many accounts in a short span of time.

But, what happens when your level of credit card usage drops? Not a whole lot, but that doesn’t mean inactivity doesn’t play a role in how your score is determined. Here, Bankrate tells you everything you need to know if you have credit cards you don’t use and are worried they’ll cause your credit score to fall.

Credit utilization and the length of your credit score


Although your payment history is the most important factor when it comes to your FICO score, the second-most important element is your credit utilization—or the percentage of debt you have in relation to your credit limits. For example, someone who owes $3,000 in balances with a total credit limit of $10,000 would have a 30 percent utilization rate.

Unlike your payment history, which may remain unchanged if you always pay your bills on time, your utilization can change each time your credit score is pulled. And if you have credit cards that you never use, your utilization rate will always be zero.

While it’s easy to assume a zero percent utilization rate would catapult you to a perfect credit score, that’s not necessarily true. Utilization is figured for each individual credit card you have, as well as all of your cards together.

While having one or some of your cards at a zero balance is fine, having zero balances on all of your revolving accounts can cost you a few points. Another factor to be aware of is the length of your credit history, which makes up another 15 percent of your FICO score. If a credit card issuer closes one of your accounts due to inactivity, you likely will take a hit in this category—particularly if the closed account was one you’ve had for a long time.

The amount of time between card inactivity and account closing


Credit card balances are reported at different times during the month, usually when your credit card statement closes. So, you can use your cards for regular spending, allow balances to accrue and pay them off each month to avoid interest. You’ll still show utilization this way, and you don’t have to rack up debt to do it.

Using more than one or two credit cards on a regular basis may prove difficult. What’s even more difficult is that there’s no real standard for how long it takes for an account to be closed due to inactivity. Credit reporting agencies such as Equifax will tell you that it depends on the credit card company. Since there’s no clear activity deadline, it’s best to try to use all of your cards every few months, even if that means setting up auto-pay on a few of them to keep them active.

Don’t let a closed account ruin your day


If you do find one of your accounts was closed due to inactivity, you have the option of calling your credit card company to request that they reinstate your account. However, they may need to do another hard inquiry on your credit report to do so. Also remember that there are plenty of other ways to maintain a strong credit score.

But it starts by establishing a good payment history (35 percent of your FICO score) and keeping an eye on your utilization rate (another 30 percent of your score).

The bottom line: The road to good credit involves keeping a diverse mix of credit accounts (credit cards, installment loans, mortgages, etc.) and not going beyond what you can manage. You don’t have to do everything perfectly to have a good credit score, but if you’re consistent in the right areas, you’re bound to see improvement over time.

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