Payment history is the most essential factor in your credit score, making up 35 percent of the total. However, the 2nd most essential factor is credit usage, coming in at 30 percent. Credit use is determined by comparing the amount of credit you use to the amount of credit you have. In this way, credit use is directly linked to the activity on your accounts. If you do not use your cards, your credit use rate will be zero.
While zero can look like the ideal goal for a usage rate, the idea here is the lower, the better, in terms of the usage percentage, but something is better than nothing. Your usage rate is determined by looking at every individual card you have as well as all of your accounts as a whole. If you have 1 or 2 cards coming in at 0%, you are okay.
However, if all of your accounts are inactive and coming in at zero, you can see the credit score lower by some points. So, what’s the ideal percentage for your credit usage?
If your use is 10% or lower, you are in good shape as far as usage goes. Another factor in your credit score is credit history, which makes up 15 percent of your total.
If your account is closed because of inactivity, this part of your score will take a hit. The longer the account was open, the greater impact closing it’ll have on your credit history.
Follow our expert credit repair advice to improve your credit score starting today after a long period of time not using a credit card!
How to raise credit score after years of inactivity
Automate your bill pay
The number-one thing you can do to increase your credit score is to improve and maintain the payment history. It means that you will pay what you owe and pay when you owe. A simple way to do that’s by automating your payment. Set up bill pay with your bank so you not miss a payment. When you will automate it, you do not need t set it and semi-forget it.
Piggyback on good credit habits
Another win if you are looking to improve your credit is to become an authorized user. This’s a particularly great tip if you are starting out and can’t have a strong score. If you have a parent and family member with great credit, you can ask them to add you as an authorized user to their credit card.
Use your credit card to pay off pennies
If you are allowing the cards to collect dust that can mean you are not overspending, but it can lead to issues. If you do not utilize your credit card, an issuer can deem the account inactive and shut it down. That can lower your overall available credit and raise your usage rate.
Keep Your Credit Card Balances Low
The higher the credit card balance in relation to the credit limit, the worse your credit score will be. Your combined credit card balances need to be within 30% of your combined credit limits to maintain a good credit score. That is $300 on credit cards with combined limits of $1,000. Charging more than 30% of your credit limit is risky even if your strategy to pay off the balance when your billing statement arrives. Card issuers report the balance when your statement closes, so that is the number that’ll be reflected on your credit report. It is a great idea to keep tabs on your accounts online and pay sufficient to decrease the balances to less than 30% before the billing month closes.
Don’t Close Old Credit Cards
When you close a credit card, your credit card issuer no longer sends updates to the 3 credit bureaus Experian, Equifax, TransUnion, and the credit scoring formula places less weight on inactive accounts. After 10 years or so, the credit bureau will eliminate that history of the closed accounts from your credit report, and losing that credit history will shorten your average credit age and cause the credit score to drop. Closing a credit card will reduce the available credit. For instance, if you have 3 cards with a combined credit limit of $10,000 and you close one with a $3,000 limit, your combined credit limit will be reduced to $7,000. Since your aim is to keep your credit card balances at less than 30% of your available credit, closing that card decreases your threshold by $900.
Manage Your Debt
Credit card balances are not the accounts that influence your credit score. Loan balances and credit lines affect your level of debt. Having too much debt may cost you points on the credit score. The lower your debt, the simple it’ll be to maintain a good credit score.
Limit Your Applications for New Credit
Too many credit inquiries whether they be for a credit card or a loan may have a negative effect on your score, so ensure you are applying for credit when it is necessary. Opening a new credit account lowers your average credit age.