How often should you be using your credit cards, and if you hold on to them to long without use, will they get closed by the credit card company? Both really good questions. On the opposite end of the credit spectrum, from heavy overuse, is extreme non use of your credit cards. Although not as harmful as the former, the latter can have an effect on your credit score, and how the history shows on your credit report.
Factors to Consider
- How many cards you have
- How often to use them
- When will they become inactive
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Lets face it, there is no one sure fire way to make your credit better, or worse, there are degrees of everything. When you consider all aspects of your credit score, credit history, and credit worthiness, you should look at the things that you can control, and one of those is the use and history of credit cards, you do not have to have them, or overuse them, they are not a right, but a privilege and honor. A useful tool to help you achieve financial success. But keep the four points in mind.
1. How many cards do you have
Having to many credit cards in your “rotation” can have a negative effect, in more ways than one, because if you are trying to keep them all active you may be getting into a financial hole, with overspending each month in attempt to create a payment history and credit personality. You may want to pare down your amount of cards, or put them on a “rotation” of such, so that you do not dig yourself into a deeper hole than necessary.
2. How often to use them
Well unfortunately, there is no set defined time in which a card can sit dormant before the issuer closes it out, and it may be a good idea to call and just ask them what their policy is. It may be three month, or three years of inactivity. But if you ask then at least you will know. Try and use your card at least every couple of months, or more frequently on smaller purchases, so that you can show a history.
3. When will they become inactive
If a card has become inactive for a certain period of time, then the issuer may not be reporting your history to the credit reporting agencies and that will have at the very least a neutral effect on your accounts or in the worst case a negative effect, showing an open account without any recent history. This may raise red flags to potential lenders, showing an inattentive state, or unawareness. It could indicate that you have little extra money to play with and you are just letting your cards sit because you cannot afford to use them.
Don’t expect any fair warning that your card has gone inactive from your issuing company, because that is not their standard procedure, you may end up finding out that your card is inactive and a most inappropriate time, when you are out and about and attempt to purchase something with it and it gets declined. If you have not used a card in some time try a small purchase of a few dollars to see if the card is still active, and once that is done you can rest easy that they have not moved the card to an inactive status. In addition, it may not be as simple as a call to get it reinstated either, so be aware that if you need it you may have to re apply, which will impact your credit score.
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Your frequent use of credit cards is an important strategy in the overall health of your credit picture, in some instances credit cards can sit dormant in your wallet or safe without a thought. This can lead to them becoming inactive, and thereby not helping your credit score. Keep in mind that conscientious use of your open credit lines is a wise and useful tool to overall financial health. Keep the four points mentioned above; how many cards you have; how often to uses them; when they may become inactive; and, the warnings that you will not get before they become inactive. In a well thought out way you can use your credit cards in a proactive way to insure that your credit card issuers are reporting your activity, and that you are not spending to much to keep them active, thereby going to deep into debt.
It is in your control to, and your responsibility to take charge of your credit report, and how those open accounts look on there, to many inactive accounts can have a negative effect on your overall credit picture.