April 24th, 2012
Thanks to the popularity of our post, “3 Things You Might Not Know About Credit Scores,” we’re once again clearing up some misunderstandings about credit scores. After all, that’s what we do best. Here are three more things you might not know about credit scores.
Not using your credit cards can be bad for your credit score.
If you have open credit card accounts but don’t use them, your credit could take a hit for two reasons:
- Some credit card issuers will mark credit cards “inactive” after a certain period of time. While they might not close the account, they may stop reporting it to the credit bureaus. This could shorten your age of accounts and increase your credit utilization rate, since the card’s credit limit will no longer appear as “available credit.”
- If you don’t use any of your credit cards, you’ll end up with a utilization rate of 0 percent, which will negatively affect your credit score. Never using your credit cards could reflect poorly on you because creditors want to see that you’re currently using the credit you have—and using it responsibly—in order to assess you as a good credit risk. If you don’t have any current activity, they won’t be able to accurately judge your creditworthiness. Keep in mind that you don’t have to carry a credit card balance from month to month to show credit card utilization.