Will Credit Cards That Are Open and Not Used Hurt Your Credit Score?
Banks and lenders use a person's credit score to help them decide how must interest to charge and how much that person can borrow. Several factors determine a person's score, including how long he's had credit, what he currently owes and if he makes timely payments on his debt. Applying for new credit and closing old accounts also affects the score.
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Credit Available Vs. Credit Owed
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The more credit cards a person has open, the greater his available credit, especially if he does not max out all his other cards. For instance, if a person has a $5,000 limit on one card and $1,000 limit on another, and has spent $500 on the second card, it appears on his report that he has spent $500 out of $6,000 instead of $500 out of $1,000. The debt-to-credit ratio accounts for part of a person's credit score.
Time Frame
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The longer a person has a credit card, the more his score rises. Keeping an unused, old card open also lengthens his credit history, which accounts for 15 percent of his FICO score, according to the FCIC.
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Risks
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Unfortunately, if he doesn't use the card for a period of time, the company may stop updating the card with the credit bureaus or may close the account, according to Liz Pulliam Weston at MSN Money, which can affect his credit score, since the unused cards are not looked at the same way as active accounts.
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References
- Photo Credit credit card and hand image by Warren Millar from Fotolia.com
