Does my credit score go down if I don't use my credit card?

Maintaining a Healthy Credit Score: The Implications of Credit Card Inactivity

In the realm of personal finance, maintaining a healthy credit score is paramount. Credit scores determine the terms and interest rates on loans, credit cards, and other financial products. While it’s widely understood that responsible credit card usage can positively impact your score, there’s also a misconception surrounding the consequences of card inactivity.

Does Credit Card Inactivity Affect Your Score?

Contrary to popular belief, simply not using your credit card does not directly result in a score decrease. Credit scores are calculated based on various factors, including payment history, credit utilization, credit history length, and new credit inquiries. Inactivity alone does not negatively affect any of these factors.

However, it’s important to note that credit card inactivity can have indirect implications for your score.

Closing Unused Accounts: A Potential Pitfall

While inactivity alone won’t harm your score, closing an unused credit card account can have detrimental effects. Closed accounts reduce your overall credit history length, which is an important factor in score calculations. Additionally, closing accounts can increase your credit utilization ratio, which is the percentage of your total available credit that you’re using. A higher credit utilization ratio can negatively impact your score.

Maintaining Credit Card Activity: Best Practices

To avoid the potential negative impacts of card inactivity, it’s advisable to keep a few of your credit cards open and active. Here are some best practices:

• Use cards for small, regular purchases: Make small purchases on your credit cards and pay them off in full each month. This demonstrates responsible credit usage and keeps your accounts active.
• Set up autopay: Enroll in automatic bill payments to avoid missed payments, which can significantly harm your score.
• Don’t close old accounts: If you have credit cards that you no longer use, consider keeping them open as long as there are no annual fees. This preserves your credit history length.

Conclusion

Maintaining a healthy credit score requires strategic credit card usage. While inactivity alone may not immediately lower your score, closing unused accounts can lead to negative consequences. By keeping a few cards open and active, paying bills on time, and limiting credit utilization, you can ensure that your credit score remains strong.