Keep your credit score high despite inactive accounts

Keeping track of your credit score can be difficult. We often have the impression that we have to years to build good credit and a mistake – on your part or someone else’s – to fill it. But it turns out that one of the easiest ways to instantly boost your score is actually to do with your dormant credit card accounts.

Chances are you have an old credit card or two that you never use. Maybe you like having one for emergencies or maybe you finally paid it off and don’t want to go into debt anymore. What makes this not-so-fun fact even more frustrating: Credit card companies lose money if cards are inactive, so to save their bottom line, they’ll shut down seldom-used accounts with little or no warning. It’s not universally required that you receive 30-45 days’ notice before your card is cancelled, so sometimes you might be in for a rude awakening when you open your inbox or mail one day. Most issuers take action after six months to more than two years of inactivity, but that amount of time depends on how individual companies classify “dormant” accounts.

While this may be great for them, this practice gives you a problem: statistics show that around 55% of your credit score is based on the amount of unused credit you have, the different types of credit you have and the age of your lines. credit. When an account is closed, it can affect all three of these factors, whether you closed it or your issuer did. In fact, some surveys and anecdotes suggest you could lose 75 to 100 points on your score for every canceled credit card account. Ouch!

So what can you do about those old cards that might take a beating if you don’t use them regularly? There’s a simple fix: If you have small, recurring monthly bills, such as your Netflix or Amazon Prime subscription, set up autopay to charge them to this card. This way you can save all the big purchases for cards that offer better rewards or points, but you don’t have to worry about your old accounts gathering dust, being canceled in the process and affecting your credit score. credit. (And if you really want to close an account yourself, there are steps you can take to do so, though you still have to be careful that it doesn’t affect your credit score.)

Not only will this make it look like you’re “using” more of your credit, but you won’t have to worry about getting a cancellation notice or seeing your credit score suddenly drop one day. It’s a win-win.