Does a credit card build credit if you don't use it?

The Sleeping Giant: How Inactive Credit Cards Still Boost Your Credit Score

Contrary to popular belief, you don’t need to actively use a credit card to benefit from its presence on your credit report. In fact, maintaining an inactive credit card can be a surprisingly effective strategy for building and maintaining a strong credit profile. While responsible spending and timely payments are crucial for a healthy credit score, the simple act of keeping an account open, even without using it, offers several significant advantages.

One of the most impactful benefits is the extension of your credit history. Lenders view a longer credit history as a sign of financial responsibility. Each year your inactive credit card remains open and reported to the credit bureaus adds to the length of your credit history, a key factor in your credit score calculations. This longevity demonstrates a consistent track record of managing credit, regardless of whether you’ve made any purchases recently.

Furthermore, an inactive credit card positively impacts your credit utilization ratio. This crucial metric represents the percentage of your available credit that you’re using. A low credit utilization ratio (ideally under 30%) signals responsible credit management. Even if you have other active credit accounts, keeping an inactive card open increases your total available credit without increasing your debt. This, in turn, lowers your overall credit utilization ratio, giving your credit score a boost. Think of it as adding a larger denominator to the fraction, thus reducing the overall percentage.

Finally, the mere existence of an inactive account on your credit report demonstrates to lenders a history of responsible credit application and account management. While it doesn’t show active spending habits, it signifies that you were once approved for credit and have maintained the account in good standing, even without actively using it.

It’s important to note that while an inactive card offers these advantages, it’s not a replacement for responsible credit management. Maintaining good standing on your active accounts remains paramount. However, strategically retaining inactive cards with a long history can be a powerful tool in optimizing your creditworthiness and achieving a higher credit score. Before closing any credit cards, carefully weigh the potential impact on your credit utilization ratio and credit history length. An inactive card might be the unsung hero silently working to improve your financial standing.