Does not using a credit card hurt your credit score?
While not using a credit card doesn’t actively harm your score on its own, there are knock-on effects that may make you want to keep using it regularly and paying it off in full every month. These include not being able to show you’re a reliable borrower (especially if it’s your only credit account), opening yourself up to the possibility of fraud, and losing access to any benefits or rewards that come with the card.
Should I close my card if I don’t use it?
This is a tricky one, as it depends entirely on your circumstances, the account in question, and what’s best for you personally. Here are the factors to consider before you make a decision.
1. Reasons to keep an account open
- To help build your credit score. If this is your only credit card, you might want to keep it open to help boost your credit score - but to maximise this, you’ll need to use the card. You’ll also need to make sure you pay at least the minimum payment each month and stay within your limit. Using a credit card to rebuild your score is done through re-writing your credit ‘history’ so that it demonstrates you’re a responsible borrower. Even just small regular transactions on the card, then paid off in full, and staying within your credit limit, could help keep your credit score tip-top over time.
- To keep your credit utilisation ratio down. Having the credit in question available to you, but not using it might be helping boost your overall credit utilisation ratio. In short, your credit utilisation ratio is the amount of credit you use compared to the credit available to you. Closing the account could mean a drastic increase in how much of your ‘available credit’ you’re using.
- It’s got a long history of responsible borrowing. Credit reference agencies like to see accounts that have been open a long time with a good record, if this is true of the account in question, it could be worth keeping it open.
- Emergency funds. It may be worth keeping a credit card open so you have access to emergency funds when you need them. This could be anything where you need to pay out a large sum at once - such as your car breaking down or an issue with your boiler.
2. Reasons to close an account
- Reduce the risk of fraud. Having an account open that you don’t use (or check regularly) could make you susceptible to identity fraud, with someone spending in your name.
- Reduce the temptation to spend. The more credit you have available, the more temptation there can be to overspend. If you’ve struggled in the past with spending beyond your means, it could be worth closing down some accounts that you don’t need.
Would a credit card company cancel my account?
There’s little evidence to show that a credit card company would cancel your account if left unused, but it could be marked as ‘dormant’.
It’s worth weighing up whether you should close the account yourself, or keep it and use regularly with small transactions. Read the reasons above and consider the age of the account, how many other credit cards you have and your personal borrowing habits before making a decision.
Does closing an account affect my credit score?
The short answer is yes, it’s likely to impact your score but exactly how and by how much depends on your circumstances. Here’s a list of ways it could impact your score for better or worse:
- It can reduce your available credit, therefore increasing your credit utilisation ratio overall
- If you have multiple credit cards and you close some newer, unused accounts, this could make you look more attractive to lenders as you’ll seem less reliant and have less access to credit
- It could knock your credit score if it’s a longstanding account with a good history - credit reference agencies look at the average age of your credit accounts
- If it’s your only credit account, cancelling it may make it hard to prove you’re a reliable borrower, as you’ll have no way of showing it - this could decrease your score over time
Should I still check my statement if I don’t use my card much?
Yes, it’s important to still check your statement regularly. You’ll need to look out for any irregular activity on your account, as it could be a sign of identity fraud. If you keep a close eye on your statements, you’ll be able to notify the lender straight away if you spot anything.
It’s also worth remembering that if you move house, you should update the billing address on all your credit accounts, whether you use them regularly or not, as mismatched identity information can be seen as a negative on your credit report.
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Intelligent Lending Ltd (credit broker). Capital One is the exclusive lender.