How to Raise Your Credit Score with Your Unused Credit Cards

Your credit score is used almost everywhere when it comes to determining your financial well-being anymore, so it’s important to make sure that you’re doing a few basic things to keep your credit score reasonably high. Credit scores are now commonly used when trying to rent an apartment, when applying for a job, when determining you insurance premiums, and when applying for just about any sort of financial product. You don’t need to worry if your credit score isn’t close to 800, but you should do some things to keep your credit score in good shape.

The single best thing that you can do is pay all of your bills on-time without any exception. After that, there are a few simple things that you can do with your credit cards to keep your score above the 700 mark that’s considered “average.” First, if you have a credit card that you don’t plan on using anymore, do not cancel the card. By cancelling a credit card, you are potentially decreasing the length of your credit history. 15% of your credit score is based on the length of your credit history, so you absolutely do not want to cancel your oldest card.

 When you close a credit card, you are also increasing what’s called your “debt utilization ratio.” This means that you are using a higher percentage of your total available debt. For example, if you had $10,000 in available credit, and used $2,000 of it, you would be using 20% of your total available credit. If you closed a credit card that had a $3,000 limit, your total available credit would drop to $7,000 and your debt utilization ratio would increase to 29%.  Since 30% of your credit history is based on the amount of debt that you currently owe, you want to make sure that your debt utilization ratio doesn’t go above 40%.

If you have an unused credit card that sits at the back of your wallet and isn’t ever used, make sure to use the card at least twice per year so that it stays ‘active’ when calculating your credit score. Make two small purchases per year, it doesn’t matter how big they are, and then pay the bill when it comes in. This will prevent your credit card from being labeled as inactive. If your credit card is labeled inactive, it essentially no longer exists for the purposes of calculating your credit score. It would be just as if you had cancelled the card.

Remember to keep your debt utilization ratio in check, not to cancel old unused credit cards, and put charges on them twice a year, and your credit score will be a lot higher than it would be otherwise if you had just cancelled your credit cards or otherwise let them sit dormant.