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.
If used wisely, a credit card can help you build your credit score in a positive way. As time passes, your needs might change; meaning what you need from a credit card might change.
At the moment you decide to open a credit card, you should have some plans. Keeping a credit 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.
For example, if you are shopping at a jewelry store and open a credit card to take advantage of a sale in the store, you might think you won’t be using the card 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.
Can a card be closed due to inactivity?
Yes, a card issuer may close your account if it’s been inactive for a long period of time. If the account is closed due to nonuse, 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% of your FICO score, second only to payment history at 35%. These two factors make up the lion’s share of your score and they are the only two factors that are 100% 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%; credit mix, or the types of accounts you have, at 10%; new credit also counts for 10%. 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).
Do unused credit cards hurt my credit score?
Not using a credit card typically doesn’t hurt your score. However, it’s important to check your credit report and score to see what effect opening the account had in the first place.
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 received 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. If you’re planning to apply for a mortgage anytime soon, a lender 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.
How to keep your card active without hurting your score
You can keep a card active by making small purchases. And those small charges can have a positive impact on your credit score, particularly if you pay your full balance before the due date. At the same time, it shows responsibility.
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. 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.