Will My Credit Score Degrade If I Stop Using My Credit Card?

It's a common question for many: what happens to my credit score if I stop using my credit card for an extended period? The most common outcome of letting your card go unused is that the card issuer simply cancels your unused credit card and closes the account. However, there is no hard-and-fast rule as to how long a credit card company will allow you to keep your unused credit card on ice. Some credit card issuers will close your credit card account if it goes unused for a certain period of months. Generally, the range is between 12 to 24 months, but this can vary depending on the card issuer.

Impact on Your Credit Score

There are several factors that can impact your credit score negatively if you stop using your credit card. One of the primary concerns is the credit utilization rate. A high credit utilization rate can be seen as a financial risk by creditors, thus negatively impacting your credit score. Another concern is the presence of unused credit cards on your credit report. Having too many unused accounts can be seen as unnecessary and may not be favorable for your credit score.

Actions to Take

Close Your Old Credit Card if It Costs You Unnecessarily:

If you have an old credit card that you hardly use but you still pay a subscription fee for it, that does not sound economical. However, as it pertains to your credit record, an old credit account is relatively healthy. Before closing an account, you might consider talking to the card issuer. Many companies would be willing to keep their customers if you approach them and ask for an annual fee waiver.

Keep Some Accounts Open:

To keep your credit score healthy, it's essential to keep a few credit accounts open. Creditors will consider you trustworthy if you can show some active and responsibly maintained credit. Closing too many accounts will increase your credit utilization rate and negatively impact your credit score.

Low Balances and Credit Utilization

If you do not use any of your credit cards for long enough that they all have a balance of zero reported, you could lose 12–20 points in your credit score. To recover these points, you could ensure that there is a very small balance on just one account. Even a balance of 2-4% will do the trick. If you pay the statement balance in full, you won't have to pay any interest.

Best Practices and Long-term Strategies

The best practice is to use your cards regularly and pay them off in full each month. This not only helps in maintaining a low credit utilization rate but also ensures that you are not paying any interest. Another valuable strategy is to request regular increases in your credit limits. Higher limits can lead to higher scores, as long as you don't allow balances to accrue.

In conclusion, while it's understandable to want to cut down on expenses, it's crucial to keep your old credit card accounts open and to use them periodically. A proactive approach to maintaining your credit score can help ensure that you have a healthy financial profile in the long run.