If you have a credit card that you are not using at all, closing that credit card account is likely to hurt your credit score. Therefore, try to keep these unused cards to maintain your good credit score, as long as you can avoid the temptation to use them to overspend.
Utilization Ratio
The major way in which an unused revolving account, such as a credit card, affects your credit score is through your utilization ratio. This number is the amount of credit you are currently using divided by the amount of total credit available to you through your credit lines. For example, if you have an unused credit card with a limit of $4,000 and a credit card you use that has a limit of $3,000 and a balance of $1,500, your utilization ratio is $1,500/$7,000, or about 21 percent. Your utilization ratio should be no more than 30 to 35 percent to avoid hurting your credit score, according to the website Bankrate.
Effect of Canceling
If you were to cancel the unused credit card, this would affect your utilization ratio because you would lose the available credit on the card. For example, if you canceled your unused card with a $4,000 credit limit and were left with just your card with a $3,000 limit and $1,500 balance, your new utilization ratio would be 50 percent. This would hurt your credit, so in a way, keeping the unused card is helping your credit score from taking this hit.
Considerations
Credit card companies sometimes close inactive credit card accounts. Therefore, if you are depending on your unused revolving account to keep your credit score high, you should use it every few months to make a small purchase and pay it off immediately. This reduces the chance that the lender will close your account. If, on the other hand, you only have a $200 balance on your card with a $3,000 limit, canceling the unused card would only increase your utilization ratio from about 3 percent to about 6 percent. In this case, the unused card is probably not helping your credit.
Warning
Although having an unused card can help your credit score, opening the card can hurt your credit score initially. Therefore, opening a few revolving cards in an attempt to boost your credit score quickly is actually likely to backfire and lower your credit score instead. This is because each new credit score generates an inquiry on your credit report, which slightly lowers your credit score. In addition, the new credit card account lowers your average account age and reduces your credit score slightly.
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