How credit card inactivity affects your credit score and why regular usage supports a strong credit profile

Do you have a credit card? How often do you use it? A common myth in personal finance is that avoiding credit cards altogether can help protect your credit profile, credit score and overall credit integrity.

It may seem prudent to just stop using your card, but the reality is more complex. Credit scores are built on good financial habits, card usage, history and responsible economic management, not on complete avoidance or lack of credit participation.

In a conversation with LiveMint, Raj P Narayanam, Executive Chairman, Zaggle, explains this, saying, “Stopping credit card usage doesn’t directly lower your credit score, but prolonged inactivity can reduce credit history depth or lead issuers to close the account. This may impact your utilisation ratio and overall profile, making periodic, responsible usage important for maintaining a healthy credit score.”

Impact of stopping credit card usage on your credit score

When you stop using your credit card, your credit score will not drop immediately. However, over time, inactivity can eventually create indirect risks. Credit businesses analyse and interpret factors such as the credit utilisation ratio, payment history, and the length of credit history.

If your credit card remains unused for a long time, issuers may close it. Such a development will shorten your credit history and increase your credit utilisation ratio.

The closure of your credit card due to inactivity can complicate future personal loan, home loan and credit card applications. This is because closure can result in a very high credit utilisation and shorten your overall credit history. This way, any closure of your credit card (due to inactivity) may be seen as a red flag by major lenders and negatively impact your overall credit profile, potentially damaging your credit score.

Here’s how inactivity can affect your credit profile

1. Your credit history length will be reduced in case accounts are closed.
2. Due to fewer available limits, the total credit utilisation will increase.
3. Lower credit engagement might impact lender confidence.
4. If your profile lacks a clean repayment history, credit applications can be rejected.
5. In the long run, this can negatively affect your credit score and profile.

Key factors at a glance and how they can impact your credit profile

You don’t need to use your credit card daily, or even frequently. However, you should use it from time to time. Small, consistent payments and regular transactions, paired with timely repayments, can help maintain a solid credit profile and a reputable credit score, preferably above 750. The key is balanced management of your credit card.

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