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I Have a Credit Card But Never Use It. Is That a Problem?

June 13, 2014
Credit Score
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Unused credit cards can both help and hurt your credit score.

Much depends on your other credit usage. Your FICO score is dependent on several factors: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and types of credit used (10%). Let’s see how this might play out.

What if I have just one card?

Let’s start with the scenario that you only have one credit card. If you never use that card, it isn’t so much that your FICO score will go down as much as it may never go up. Responsible usage helps your FICO score. Irresponsible usage hurts your FICO score. No usage won’t move the needle. So if you have a fantastic score already, it’s no big deal. However, if your score is low or you have no credit history, it’s time to use that card, albeit just a little.

If you’ve never used your credit card, it might be a good idea to use it sparingly and pay it off on time, every time. That will help the payment history part of your score.

As for amounts owed, the less of your total credit you use, the better. Instead of offsetting payment history points by not using any of your credit, use a little bit each month. This is tied to the idea of your utilization rate. Credit card companies prefer to see a little utilization as opposed to none.

In order to establish a length of credit history, you are again better off using the card a little bit than not at all. You have no length of credit history if you never use the darn thing.

New credit doesn’t matter much here, unless you have just gotten approved for the card. Your score is helped more if the card is new and you use it sparingly and pay it off than if you don’t use it at all.

Types of credit used is a category where using or not using the card may matter a bit more. If you have other forms of credit already humming, then it’s not as essential to use the card, although it helps if you do. If you have no other forms of credit open, then using the card is going to help.

What if I have a lot of cards?

If you have lots of cards, this issue becomes much less important. Some people let several cards sit dormant as they use other cards to collect reward points. Then they may cycle back to these unused card for their rewards. In some cases, they have cards they haven’t touched in years.

Not using those cards isn’t going to hurt a FICO score. Using them will help. In this case, with many other forms of credit open, those people could conceivably cancel those unused cards to save on annual fees, if any. However, their utilization rate may then increase, and that could hurt their score. That will depend on how much of their total credit is outstanding.

Credit card on ice image via Shutterstock