Maintaining an active credit card account with a good payment history can improve your credit score. An open credit card that isn’t used is another matter. If you never buy anything with the card, it won’t directly put a dent in your credit rating. However, non-use can lead to indirect consequences that will hurt your credit score.
Inactive Credit Cards
Keeping a credit card open and not using it does not have a negative impact on a credit score. In fact, it can help because the zero balance lowers the percentage of debt you have compared to your available credit. The problem is that credit card companies can deactivate cards that aren’t used for several months. Unused cards can even be deactivated before their expiration dates, and you might not have any advance warning. Closing inactive accounts isn’t considered an adverse event for credit purposes, so the company doesn’t have to notify you.
Credit Utilization Ratio
If you never use a credit card and the account is closed, it may have a negative impact on your credit utilization ratio. Credit utilization is the portion of your credit card credit limits you’ve actually charged. A low ratio is good and counts for up to 30 percent of a credit score. Suppose you have two cards, each with a $2,000 limit. One has a balance of $800 and the other is at zero because you never use it. Your overall credit utilization is $800 out of $4,000. That’s 20 percent, which is pretty good. If the unused card is deactivated, your available credit drops to $2,000 and your credit utilization jumps to 40 percent. A jump like that will probably take points off your credit score.
The Value of Time
The length of time you’ve used credit factors into your credit score. This makes a credit card a big plus since, unlike accounts such as car loans, a credit card account can exist indefinitely. The older a credit card account becomes, the more it can add to your credit score – up to 15 percent. If you don’t use the credit card and the open account is closed by the issuing company, you lose the time value of the account. That can take points off your credit score by shortening your credit history.
Keeping Cards Active
It’s pretty simple to keep a credit card open so it will continue helping your credit score. Just use it to buy some small item every month or so. When your monthly statement arrives, pay off the balance. This will keep the card active and adding to the length of your credit history. Since you’re paying off the balance each month, the things you charge will have little or no effect on your credit utilization ratio.
Based in Atlanta, Georgia, W D Adkins has been writing professionally since 2008. He writes about business, personal finance and careers. Adkins holds master's degrees in history and sociology from Georgia State University. He became a member of the Society of Professional Journalists in 2009.