The credit card company said that since I haven’t used my credit card they are going to close it and it could affect my credit score. Why would it affect my score?
This is a great question! There are a couple of factors at play. One, if your credit card has been opened for a good period of time it will change how long you’ve had this account established. Length of credit history is 15% of your credit score. The longer you show you’ve managed an account in good standing, the better.
Another factor could have more to do with an increase in your utilization. If a card is closed, then your utilization could increase because now your total available credit has decreased. For example, let’s say the card they are talking about closing has a $5,000 credit limit with a zero balance. You have $30,000 in total credit limits and you owe $9,000 in total credit card debt. You are currently at a utilization percentage of approximately 30%, and you have 70% available. If they close your card account (hence you are not making them any money not using it) now your overall available credit is $25,000 but you still owe $9,000 in total credit card debt. Now your utilization just increased to 36% and your available decreased to 64% from the account being closed. You’ll see a change in credit score because you’ve increased your utilization.
It is always safe, if you are able to and have the discipline, to leave the account open to not see an effect on your credit score. A small purchase like a bag of chips and pay it off at the end of the month is sometimes worth the trouble to keep your score in tact. Especially if you know you have a need for credit in the near future.