Remember that time in high school when you wanted to be cool so you opened a credit card, which now stays in a drawer, unused? Well, don’t even think of closing it, because it can really help you!
We’re talking about the impact it has on the length of your credit history, which directly improves your credit score. And we’re all after some numbers as good as possible because you never know when you need a loan, for example.
It’s all about the credit score
Theoretically, your credit score is determined by longevity, alongside payment history and the amount you owe. Still, about 15 percent of it is determined by the length, as the age of each account you own, as well as how long it’s been since you used them are taken into account.
“If your credit history is lengthy, lenders have more information to accurately assess creditworthiness,” says Credit Karma. “It’s also frequently an indication that you have been able to successfully manage your credit.”
Moving on, let’s not forget that whenever you close accounts linked to unused credit cards, you’re also reducing the amount of available credit, an aspect which can affect your credit utilization ratio. Basically, your credit card company will believe that you’re using more of the available credit that it’s still left.
What should I do if I want to keep it open?
Well, it’s your decision, after all, but make sure you consider a few very important aspects!
First thing first, figure it out if your unused credit cards can tempt you to run up your expenses. If they do, get rid of them. It’s not worth getting into debt just to get a few extra points.
Secondly, contact your issuer and make sure it doesn’t cost you an annual fee. If this happens, try downgrading it to a no-annual-fee card, if it’s possible.
And finally, use it from time to time. Sure, if you haven’t used an old card until now, nobody says to start carrying it around all the time. It’s enough to make a purchase per year, just to keep it active.