When you do not use your credit card for an extended period, it is known as credit card inactivity. While some think that this is a wise move for those that have trouble paying off debt, it is a good idea to remember that when you have inactivity on a card, it may affect your credit report.
In this article, we will take a look at what credit card inactivity is and what this may do for your credit report. We will also discuss how to cancel a credit card if need be and if that will hurt your credit score as well.
Credit Card Inactivity
A credit card issuer may decide to close your account if you have not used your credit card in a year or more. You may ask why they would close your account. Well, credit cards are in the business to make money. If you have a balance of zero and are not purchasing items, then they are not making any money off interest or fees from you. While you may not think of that as a huge deal, another way to think of it is that the credit card company is only allowed so much money with credit lines. If you have a higher credit line and are not using it, then this is credit that could be given to someone else that may need or use it.
What Hurts Your Credit Report
When a credit card is canceled due to inactivity, it can hurt your credit report in a variety of ways.
• If your credit card is an old one, and it is canceled, the average age of your credit cards will be affected. Older credit card accounts tend to boost an individual’s credit score.
• If you have an account closed, your amount of available credit is decreased. Many times this will increase your overall credit utilization ratio, which in turn will affect your credit score in a negative manner.
Keep in mind that if you have a positive credit history with a closed account, it should not affect your credit score and will remain on your credit score for up to ten years. If you have a negative history, this will be on your credit score for up to seven years with negative effects.
How to Cancel a Credit Card
If you need to cancel your credit card, you can do it one of many ways. If you have an online account, simply log into your account and look for the “close account” button on the page. It may be listed under “cancellation”.
If that is not an option for you, you may call the customer service number on the back of your card to cancel the account. A customer service agent will be able to assist you in this manner.
It should be taken into consideration that if you do decide to close your credit card account, it is wise to pay off some other debts to have a lower credit utilization ratio.
Review Your Credit Report
One wise move is to review your credit report a few times per year. It is suggested that you get a free credit report from one of the three bureaus once every four months, instead of obtaining them all at once. If you notice any credit marks that are not correct, it is wise to contact a credit repair agency, such as Super Credit Repair. They will be able to help you remove inaccurate or outdated material on your credit report, which can ultimately boost your credit score.
Picture Credit: Tevarak