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Keeping Score

Will it hurt my credit score if I never use my credit card?

Your issuer may eventually close the card after a lengthy period of inactivity, and that could affect your score

Summary

Not using your credit card doesn’t hurt your score. However, your issuer may eventually close the account due to inactivity, and that could affect your score by lowering your overall available credit. For this reason, it’s important to not sign up for accounts you don’t really need.

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Dear Keeping Score,

I just got a credit card at Kay Jewelers. I went to get a necklace fixed and I asked them if I owed them anything. They said its $7 or it is free with an account. I told them “that’s OK” meaning I’d pay the $7, but instead they opened me an account. It was free to get and there is no yearly payment and Kay will close the account after two years of no use. I have absolutely no plans of using the card so my question is will this negatively affect me if I never use it? – Ryan

Dear Ryan,

It’s been said that if you want to hear God laugh, you should make some plans! In your case having no plans to use the card may only elicit a chuckle from the big guy.

But seriously, keeping the card shouldn’t hurt anything, with one possible exception I can think of. Closing the account shouldn’t have any effect other than to restore your credit file to its pre-issue state minus the temporary impact of a hard inquiry. Let’s discuss these.

I am a little curious as to why you were shopping at a jeweler in the first place and why you think you won’t be doing this again. If it was a goodbye gift for a friend, you’re right – you may never go back. But if it was for a person still in your life, who knows if you’ll be back for a second installment? In that case, having a card may get you a better price on a future promotion or sale.

Check out all the answers from our credit card experts.

Ask Steve a question.

Check your credit report to see the new card’s initial impact

If you never use the card I don’t believe there will be any additional impact to your score. However, if I were you, I would check my credit reports and score right now to see what effect opening the account had if you haven’t done so already.

Hard inquiries can pull a score down a few points until you show that you are able to handle the additional credit risk (usually a few months). Since you got a credit card, that means a hard inquiry was done. This small loss of points is often negated by the addition of more credit available to you, so it truly becomes a wash in many cases.

Here is where my one exception comes in. Are you planning to apply for a mortgage anytime soon? If so, some mortgage lenders can get concerned if you have too much in the way of existing credit lines. The worry is that you might get overstimulated one day and go out and buy everything your credit line allows, thereby jeopardizing your ability to pay their loan. This is unlikely, but I have seen it happen.

See related:  How to cancel a credit card without hurting your score

Your card account may get shut down due to inactivity

If the account is closed due to nonuse in two years, you will need to consider the loss of the additional credit you were given when the account was opened. When the account closes, you will lose that available credit and your utilization points may suffer.

Credit utilization – or how much of your available credit you have accessed – makes up 30 percent of your FICO score, second only to payment history at 35 percent. These two factors make up the lion’s share of your score and they are the only two factors that are 100 percent in your control at all times. I would have said new inquiries are also always in your control, but your situation seems to say otherwise.

The rest of your score is made up of credit history, or how long you have had your oldest account, at 15 percent; credit mix, or the types of accounts you have, at 10 percent; new credit also counts for 10 percent. Your accounts can only be as old as they are, so there’s not much you can do about that. Credit mix is also sometimes hard to manage since it means you must have some type of account besides just credit cards (think installment type loans like a mortgage or an auto loan).

See related:  Credit score impact of opening, quickly closing a new card

Avoid signing up for accounts you don’t need

Your credit score and your accounts ultimately belong to you and you have a vested interest in doing the things that will help you the most. That includes not allowing yourself to be signed up for something you don’t want.

Entering into a new credit agreement with anyone should always be done thoughtfully, with an eye toward what it may do to your score as well as how you will manage the account.

And speaking of that, you need to be very sure that that $7 didn’t somehow make it onto that credit card. I don’t think it will have, because you were told the charge would be free if you signed up, but it would not hurt to double-check on that. The very last thing you need is for a $7 charge to go unpaid and start racking up interest and late charges. Again, I don’t really think that will be the case, but better safe than sorry.

So, when all is said and done, keeping the account open or closing it is up to you. I suggest you check your score now and then again in a few months. This will show you the real impact once the inquiry’s effect has faded away.

Expect a similar-sized reversal if you close the account. Should you want to close it, just contact their customer service number and tell them you want out. They may try to persuade you to stay, but you can close any account anytime you wish.

Remember to keep track of your score!

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Published: September 3, 2019

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Credit Card Rate Report Updated: September 11th, 2019
Business
15.45%
Airline
17.38%
Cash Back
17.53%
Reward
17.40%
Student
17.58%

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