Will Credit Cards That Are Open and Not Used Hurt Your Credit Score?
Most people’s credit scores won’t suffer from keeping credit cards open, even if you’re not using them regularly. However, if you don’t use your credit card regularly, you run the risk of having your issuer close the account – which can impact your credit score.
Credit Utilization
Credit cards with a consistently zero-balance can help your credit utilization ratio, which is the second most important factor in determining your credit score, counting for 30 percent of your score. Your credit utilization ratio measures how much of your available credit you’re using at any time. If you have a card you’re not using, that card is reducing your utilization ratio – which is a good thing – because it increases your available credit without increasing the amount you owe.
Positive Payment History
Even though you’re not charging any money on your card each month, your card still reports that you’re current on your bill, which shows up on your credit report and helps show you have established positive credit habits. Your payment history counts for 31 percent of your credit score, making it the most influential factor in figuring your score. If you close your account, you stop getting recognition for being current on the account, and eventually the account will fall off your credit report.
Credit History
Keeping the account open also extends the amount of time that positive history stays on your credit report and can be taken into account when factoring your credit score. As long as the account is open, the positive information stays on your credit report. On the flip side, closing an account won’t get any negative information off your credit report any faster than it would if you kept the account open.
Closing Accounts
Even though it won’t help your credit score, sometimes closing an unused credit card is still beneficial. If the card is charging you an annual fee, it might not be worth the cost to keep the card open. However, if you’re planning on applying for a new loan in the near future, you may want to consider keeping the account open until after you’ve been approved for the new loan to show the new lender you can be responsible with your payments.
About the Author
Mark Kennan is a freelance writer specializing in finance-related topics. He has worked as a sports editor and published articles on a number of online outlets.
This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.
Published by permission from ConsumerInfo.com, Inc. © 2014 ConsumerInfo.com, Inc. All rights reserved.
