In general, keep unused credit cards open so you benefit from longer average credit history and lower credit utilization. Consider putting one small regular purchase on the card and paying it off automatically to keep the card active.
A crowded wallet and the temptation to spend might have you thinking about canceling unused credit card accounts. In most cases, however, its best to keep unused credit cards open so you benefit from longer credit history and lower credit utilization (as a result of more available credit). You can use the card for occasional small purchases or recurring payments to keep it active as opposed to using it regularly.
But there are compelling reasons to cancel a credit card, too, despite the potential impact to your credit. If your unused card has an annual fee you can no longer afford, youre concerned about controlling your spending or the account you want to close is relatively new, canceling a card may be a good option.
Having access to credit is an important part of financial health. Lines of credit give you flexibility to access funds when you need them. But some people worry that open, unused credit lines may actually hurt their credit scores. So what’s the real impact of unused credit lines? Let’s take a closer look.
How Credit Scores Work
First, it helps to understand what makes up your credit score. The FICO credit score, the most commonly used score, is calculated from five main factors:
- Payment history (35% of score) – Whether you pay your bills on time.
- Credit utilization (30%) – The amount of available credit you are using.
- Length of credit history (15%) – How long you’ve had credit accounts.
- New credit (10%) – How many new accounts you have.
- Credit mix (10%) – The variety of credit types you have.
As you can see, unused credit lines aren’t a direct scoring factor. But they can indirectly affect your utilization rate and length of credit history
The Impact of Unused Credit on Utilization
Credit utilization compares your total balances to your total available credit limits For example
- Credit card 1: $5,000 limit, $2,000 balance
- Credit card 2: $3,000 limit, $0 balance
- Total credit: $8,000
- Total balances: $2,000
- Utilization rate: $2,000/$8,000 = 25%
As this shows, unused credit lines increase your total available credit. This lowers your overall utilization rate.
The lower your utilization, the better for your credit score. Experts recommend keeping utilization below 30%. High utilization over 50% can negatively impact your score.
So having open, unused credit can be beneficial by keeping utilization low. Having unused credit lines shows lenders you can handle more credit.
Unused Credit also Lengths Your History
The length of your credit history also plays a role in your score. In general, the longer your accounts have been open, the better.
Keeping unused credit lines open continues building your history. Closing accounts lowers your total history length.
For example:
- Credit card open 5 years with $5,000 limit
- Credit card open 1 year with $3,000 limit
- Total history if both remain open: 5 years
- Total history if newer card closed: 3 years
So again, keeping unused cards open optimizes this factor too.
When Unused Credit Could Hurt
While in most cases unused credit helps your score, there are a few scenarios where it could have a negative impact:
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Too many new accounts – Opening many new accounts in a short period can lower your score. The increase in available credit from unused cards may not offset this ding.
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High utilization on other cards – If you max out cards while leaving others unused, it could signal risk. Lenders may see unused credit as an attempt to artificially inflate your total limits.
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Paying annual fees – Keeping unused cards with annual fees costs you money without providing benefit. Consider cancelling these cards.
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Account fraud – Dormant accounts increases fraud risk. Monitoring unused cards takes extra effort.
The impact also depends on your overall credit profile. Someone new to credit may benefit from increasing available credit. But people with ample credit limits see little positive impact from another unused account.
Tips for Managing Unused Credit
Here are a few best practices when it comes to unused credit lines:
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Use your newest card periodically – This builds positive history and shows you can manage more credit.
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Cancel dormant cards with annual fees – Reduce costs while keeping your longest open accounts.
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Monitor credit reports regularly – Catch any fraudulent activity quickly on unused cards.
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Ask for credit limit increases sparingly – Raise limits only on frequently used cards to control utilization.
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Close newer unused cards if opened solely for promos – This avoids lowering your length of credit history.
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Consider balance transfers – Move balances from maxed out cards to unused ones to improve utilization.
The Bottom Line
Having open, unused credit lines can benefit your credit score by optimizing credit utilization and length of history. Just keep unused accounts to a minimum and monitor regularly for fraud. Unused credit gives you flexibility while building positive credit habits over time.
Positive Payment History Stays on Your Credit Report
Ideally, youll close your credit card account when its in good standing, which means you have no late or missed payments in your payment history. A closed account in good standing stays on your credit report for 10 years, and those on-time payments continue to positively impact your credit score during that time.
But beyond the positive payment history, canceling a credit card can end up reducing your credit score, at least initially. One reason? Getting rid of a credit card reduces your available credit, and any outstanding credit card debt will suddenly account for a greater portion of it.
For example, if you have a credit card with a $2,000 credit line and another with a $3,000 credit line, your total available credit is $5,000. If you currently have $1,000 in debt between the two cards, your credit utilization rate is 20%.
When you close the card with a $2,000 credit line, your available credit decreases to $3,000. With $1,000 in credit card debt, your utilization rate jumps to about 33%. The amount you owe on your credit accountsâincluding your credit utilizationâaccounts for 30% of your FICO® ScoreÎ, so this change can have a significant impact. Experts recommend keeping your credit utilization below 30% at all times, and the lower, the better.
Decreased Average Age of Accounts
Your length of credit history, or how long youve been actively using credit, accounts for 15% of your FICO® Score. Closing a credit card accountâespecially the oldest oneâreduces the average age of your accounts, and can negatively affect your score.
Again, however, since accounts closed in good standing will remain on your credit report for 10 years from the closure date, they will continue to be factored into the length of your credit history.
Does Checking Your Credit Hurt Your Score?
FAQ
Is it bad to have unused lines of credit?
An empty line of credit is perfectly fine, great to have in case you need it. I’ve been holding empty LOCs that were given to me by FIs and have been holding them for about a decade now and didn’t have issues applying for mortgage or car loans.
Does closing an unused line of credit affect credit score?
This could cause your credit score to decrease, because the loss of the account would shrink your available credit (and thus negatively affect your credit utilization). Having your account closed might also potentially shorten your credit history if your line of credit was one of the first credit accounts you opened.
What happens if I get a line of credit and don’t use it?
After you’re approved and you accept the line of credit, it generally appears on your credit reports as a new account. If you never use your available credit, or only use a small percentage of the total amount available, it may lower your credit utilization rate and improve your credit scores.
Should you close unused credit lines?
The bottom line
Keeping the card open can help maintain a healthy credit score by contributing to your credit history and utilization ratio. However, there are valid reasons to consider canceling, such as high annual fees or difficulties managing multiple accounts.