Credit Building > Can getting a credit card and not using it improve your credit score?

Can getting a credit card and not using it improve your credit score?

Wollit Team2 minute read · Updated 31st July 2024

Getting a credit card and not using it at all might not improve your credit score the way you think. In fact, it might even lower it a bit, at least temporarily. Let’s look at how this happens.

How does a credit card help me improve my credit score?

A credit card can help you improve your credit score in a few ways:

Credit cards help establish a credit history, which is the most important thing for your credit score. By using a credit card regularly, you basically show lenders that you can manage credit and debt. Lenders report your payment history to the credit reference agencies, and consistent on-time payments will build and improve your score. This is especially important if you have little or no credit history – for example, if you just moved to the UK.
Lenders like to see that you’re not too reliant on credit. Because of this, using your card only for small, regular purchases, and keeping your credit utilisation ratio low (ideally below 30%, and even better below 10%) also improves your credit score. Credit utilisation means how much of your credit limit you’re actually using.
Finally, keeping an older credit card open can improve your credit score over time, as it adds to the length of your credit history. Lenders prefer to see that you’re not completely new to credit.

Can I improve my credit score by not using a credit card?

This is where things get a bit tricky. In theory, simply having a credit card could improve your credit score, even if you don’t use it.

First, an unused credit card contributes to your overall credit limit. For example, if you have a total credit limit of £5,000 across two cards but only use one with a £2,000 limit, your credit utilisation is 40%. Keeping the unused card can lower this ratio, which is good for your score.

Second, keeping a credit card can improve the overall age of your credit accounts. You’ll have a longer credit history.

However, in practice things won’t be as simple.

Any credit account, including a credit card, improves your credit score only by building a history of on-time repayments. This is why an unused credit card might actually hurt your credit score:

Many credit card companies may close accounts that remain inactive for a long time. This can lead to a sudden drop in your credit limit and increase your credit utilisation ratio, which will hurt your credit score. You might also need to go through a credit check if you want to reopen the account, which again lowers your credit score. affect your credit utilisation ratio.
Lenders also generally like to see recent activity on your credit accounts. Not using your credit card may give the impression that you are not managing credit responsibly.
Finally, when you apply for a credit card you’ll have to go through a “hard” credit check. This kind of credit check can temporarily lower your credit score. If you don’t use your credit card, then your credit score will take a hit without any real benefits.

One more way that not using a credit card can hurt your finances: many card providers charge a credit card monthly fee and some even an inactivity fee. Usually these are waived if you actually make purchases on your card.

How could I improve my credit score if I don’t want to use a credit card?

Building your credit history with a credit card requires you to first buy things on debt and then repay them as soon as possible. You’ll have to deal with fees, high interest rates, and the risk of maxed out card limits. Plus all that extra debt. So it’s understandable if you want to find another way to improve your credit score.

A better alternative is downloading a credit-building app like Wollit.

With Wollit, you only need to pay a fixed monthly subscription. Wollit then reports this subscription as a loan repayment to the credit reference agencies.

This directly builds your credit history and improves your credit score – while keeping you safe from fees, high APR charges, maxed-out credit limits, or the risk of more debt.