Will my credit score drop if I stop using my credit card?

The Forgotten Plastic: Will Not Using Your Credit Card Hurt Your Score?

We all have them – those credit cards lurking in wallets or sock drawers, relics of past financial decisions. Maybe you opened them for a specific promotion, or perhaps you’ve simply moved on to a card with better rewards. But before you completely forget about that dormant plastic, consider this: will letting a credit card gather dust actually damage your credit score?

The short answer is: potentially, yes. While simply owning a credit card, even one you don’t use, won’t automatically tank your credit score, extended inactivity can trigger a chain of events that could have negative consequences.

Here’s how the inactivity can hurt your credit score:

1. Account Closure and Diminished Available Credit: Credit card companies, in their pursuit of efficiency, often close accounts that haven’t seen activity for a prolonged period. While the timeframe varies (typically 6-12 months of inactivity), the impact of this closure can be significant. When a credit card account is closed, your overall available credit is reduced. This is a crucial factor in calculating your credit utilization ratio.

2. The Credit Utilization Ratio Connection: Credit utilization is the amount of credit you’re using compared to your total available credit. It’s a significant component of your credit score, often accounting for around 30% of the total. Think of it like this: if you have a $10,000 credit limit across all your cards and you’re carrying a balance of $2,000, your credit utilization is 20%. Closing a card, especially one with a high credit limit, shrinks your overall available credit. If you’re still carrying the same $2,000 balance, your utilization suddenly jumps up, potentially negatively impacting your score. A higher utilization signals to lenders that you might be more reliant on credit and potentially a higher risk.

3. Impact on Credit Mix (Minor but Present): Credit scoring models consider the variety of credit accounts you hold. While not the most influential factor, having a mix of credit cards, loans, and other credit products can demonstrate responsible credit management. Closing a credit card removes one element from that mix.

So, what’s the solution? How do you avoid the pitfalls of credit card dormancy?

The answer is surprisingly simple: Keep your cards active.

Here are a few easy ways to prevent account closure and maintain a healthy credit profile:

• Set Up Recurring Small Purchases: Link the card to a recurring payment for something small and essential, like a streaming service subscription or a monthly bill. This ensures regular activity without requiring significant spending.
• Use it for Gas or Groceries (and Pay it Off): Make a small purchase every few months, like filling up your gas tank or grabbing a few groceries. Crucially, pay off the balance in full and on time each month to avoid accruing interest.
• Transfer a Small Balance: If you have a balance on another card, consider transferring a small portion to the dormant card. This will trigger activity and demonstrate responsible balance management.

The Takeaway:

Letting a credit card languish in inactivity can indirectly harm your credit score by leading to account closure and a potentially higher credit utilization ratio. By implementing simple strategies to keep your cards active, you can protect your creditworthiness and avoid any unexpected score drops. Remember, responsible credit management is about more than just avoiding debt; it’s also about actively managing your existing credit lines. So, dust off those dormant cards and put them to work, even in a small way, to maintain a healthy and vibrant credit profile.