Does credit card inactivity affect your credit score?

Credit card inactivity could hurt your credit score. Here's what you need to know about how your credit score could be affected by a dormant credit card. (iStock)

Your credit score plays a major role in your financial life as it determines if lenders will extend you credit as well as what rates you'll have to pay to borrow. It's important you understand how your credit score is determined and what steps you can take to increase it so you can ensure you are a competitive borrower who can qualify for loans at low rates.

You'll also need to understand what types of behaviors could hurt your credit score. Credit card inactivity is one of those. Inactivity happens when your credit card isn't a good fit and you don't use it for a long time. It could have unintended consequences that lower your credit score, so it's a good idea to avoid it.

To make sure credit card inactivity isn't a problem for you, consider visiting Credible's online marketplace to find the right credit card that you're excited about using.

Do unused credit cards hurt your score?

Inactive credit cards, or cards you don't use, can damage your credit score in a few ways.

  • Your card utilization will be 0%
  • Your credit card could be closed
  • The average age of your credit history could be cut short

Your card utilization will be 0%: If you don't have any activity on your credit cards, your card utilization ratio will be 0%. While a lower utilization ratio is preferable to a high one, not using any of your cards can cause your score to drop a bit since lenders won't see a track record of responsible borrowing and repayment.

It's important not to confuse inactivity with not carrying a balance, though. You can pay your card off in full each month without hurting your credit score as long as you're using it.

Your credit card could be closed: Inactive cards can also sometimes be closed, which can hurt your credit utilization ratio by reducing the amount of credit available to you and, potentially, making it appear you're using too much of your available credit if you have a balance on other cards.

The average age of your credit history could be cut short: Having an account closed can also shorten the average age of your credit history. And if you have just a few cards and one is closed due to inactivity, the types of credit metrics could be adversely impacted as well.

It's always good to have more than one credit card. If you're looking to open another credit card, you can compare credit card companies and the rewards and benefits currently being offered via Credible.


When is a credit card considered inactive?

A credit card is considered inactive if you don't use it for long periods of time. The exact amount of time your card needs to be dormant before it's considered inactive varies by the card issuer, but it's usually around a year or sometimes longer.

You can avoid your cards becoming inactive or closed by making a small purchase once every few months, or by setting up an automatic bill pay using your card. You could, for example, sign up with your cell phone provider or a streaming service provider to charge your monthly payment automatically to your card each month so you don't forget to use it.

It can be helpful to have a diverse mix of active credit card accounts. If you want to take steps toward improving your credit score (aside from paying your bills on time and spending money frequently on your cards), consider opening a new credit card. You can explore a variety of credit card options using multi-lender site Credible.


Do credit card issuers close inactive accounts?

Credit card issuers do close inactive accounts, usually, after at least a year passes without the card being used at all. You should be notified before your card is closed and given the opportunity to take steps to avoid the closure, such as making a purchase. Many card issuers also give you the opportunity to reopen a closed card within a short time, such as within 30 days after it has been shut down.


How is a credit score determined?

To understand how credit card inactivity can hurt your credit score, it's helpful to know what factors determine your score. There are five, including:

  • Payment history
  • Credit utilization ratio (the amount of credit used, relative to the amount you have available)
  • Age of credit history
  • Types of credit
  • Number of inquiries (requests for new credit) on your report.

While payment history and credit utilization ratio are the two biggest things lenders look at, having a long track record of on-time payments and a mix of different kinds of credit can also help boost your score. And avoiding applying for too much credit at once can be beneficial as too many inquiries in too short a time can damage your score.


How can I improve my credit score?

To improve your credit score, you should make small purchases on your credit cards regularly and pay your bills on time. If your credit utilization ratio is above 30%, you should work to pay down debt to lower it. You should also maintain a mix of different kinds of debt, such as credit cards and installment loans, and avoid taking on too many new financial obligations at a time.

Using a credit card responsibly can be one of the best ways to maintain a high credit score, so visit Credible today to compare your credit card options and find a card that's a good fit.