Keeping track of your credit score can be difficult. It often feels like it takes years to build good credit and one mistake — either on your part or someone else’s — to tank it. But it turns out that one of the easiest ways to instantly increase your score actually has to do with your inactive credit card accounts.
Chances are you have an old credit card or two lying around that you just never use. Maybe you like to have one for emergency situations or maybe you finally paid it off and don’t want to rack up any more debt. Which makes this not-so-fun fact even more frustrating: Credit card companies actually lose money if cards are inactive, so to save their bottom line, they’ll shut down seldom-used accounts with little to no warning. It’s not universally required that you receive 30 to 45 day notice before your card is cancelled, so sometimes you could be in for a rude awakening when you open your inbox or mail one day. Most issuers take action after anywhere from six months to over two years of inactivity, but that amount of time depends on how individual companies categorize “dormant” accounts.
While that might be great for them, this practice causes a problem for you: Statistics show that around 55 percent of your credit score is based on how much unused credit you have, the different types of credit you possess, and the age of your lines of credit. When an account is closed, it can affect all three of these factors, regardless of whether you closed it or your issuer did. In fact, some surveys and anecdotes suggest that you could lose anywhere from 75 to 100 points off of your score for every cancelled credit card account. Yikes!
So, what can you do about those old cards that could take a hit if you don’t use them regularly? There’s a simple solution: If you have any small recurring monthly bills, such as your Netflix or Amazon Prime subscription, set up auto-pay to charge them to that card. That way, you can save any big purchases for cards that have better rewards or points but don’t have to worry about your old accounts collecting dust, getting cancelled in the process, and affecting your credit score. (And if you really do want to close an account yourself, there are steps you can take to do so — though you still have to be careful to ensure it doesn’t affect your credit score.)
Not only will this make it appear that you’re “using” more of your credit, but you also won’t have to worry about receiving a cancellation notice or watching your credit score suddenly dip one day. That’s a win-win.