Like it or not, credit cards have a big impact on your credit score, so it is important to understand how this all works. As an educator of credit for a credit repair company, I often teach consumers how to open credit and effectively use it to help them improve their credit scores.
Banks issue credit cards to consumers to make a profit from them. If a consumer does not use their credit cards, the banks stand no chance of collecting their interest charges, hence no profit. It costs the banks money to keep credit cards open so most require some activity on the card to keep it open. Notice I said they require activity, you do not have to pay them interest where they make a profit, to keep your credit card open. Banks know that they will eventually make a profit off the average consumer if they are using their credit cards.
How often do you need to use your credit cards to keep them open?Based on my 30+ years of experience working with consumers and their credit, I can say there is not an exact answer to this question. In my experience, most banks will keep credit cards open if they see activity at least once a year. Personally, I try to use my revolving credit cards at least once every 6 months. As an example, I recently went to a department store and bought a tee shirt ($10 or so) with their credit card purely to keep activity on the card. Once I received the statement, I paid the bill in full and will repeat this process in 6 months or so.
Credit scores are designed to predict the risk of a future payment default. The higher the score, the lower the risk; the lower the score, the higher the risk. Credit cards give consumers fast access to credit so in times of financial trouble, a consumer can lean on a credit card to get by rather than defaulting on a current payment obligation. Therefore, consumers who have open credit cards with low to no balances relative to their credit limits do well in this category of the credit score.
At the end of the day, you can’t force your credit card company to keep your credit card open. Banks can close a credit card if they choose to. By keeping regular activity on your credit card, you are giving the credit card companies a reason to keep the card open. My advice is to keep all your credit cards active. If you have one that you have not used in a while, I suggest you dust it off and go make a small purchase to generate a statement.
If your credit needs some help, take action. There are a lot of resources available on steps to improve your credit. You can get free information from the FTC or contact a professional credit repair company like CureMyScore.com for help. By taking action to improve your credit, you may qualify for the home of your dreams or a new auto while paying less in interest charges.
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Credit Reporting / Scoring Expert, Chris McConville is the President of Credit Education at CureMyScore.com and founder of myexpertcreditwitness.com where he works as an Expert Credit Witness in both Federal and State Court. With working in the credit and mortgage fields since 1991, he’s dedicated to sharing his knowledge to educate consumers.
