Credit Score Basics > Does a credit card being closed due to inactivity affect credit score?

Does a credit card being closed due to inactivity affect credit score?

Wollit Team3 minute read · Updated 29th June 2024

A closed credit card due to inactivity can affect your credit score in several ways: it can shorten your credit history, increase your credit utilisation, and reduce the diversity of your credit mix, all of which can hurt your credit score.

Can a credit card be closed due to inactivity?

Yes, a credit card can be closed due to inactivity. This is because credit card interest and fees are how credit card providers make money—if you don't use yours, your credit card provider will only see you as a cost.

Also, if you see that your credit card has been closed and you want to re-open it, you will need to contact your credit card provider. If you contact them as soon as possible, you may be able to reinstate your account, although it's not guaranteed.

How long can my card be inactive before it's closed?

It depends on the company. You should speak with your credit card company or check their website.

Most companies require at least a year of inactivity before they close an account, so you shouldn't panic if you haven't used yours in a few months.

Will I be notified before my credit card is closed?

Not necessarily. Some credit card providers might not notify you at all, while others might inform you via SMS, text message, email, letter or even through a banner that appears when you log in to the credit card app. Some of these can be easy to miss.

How does a closed credit card affect my credit history?

A credit card is a loan. Having a loan in your credit history and showing that you're paying it back regularly makes lenders trust you more, so having a credit card is usually good for your credit score.

But this also means that having a credit card closed due to inactivity can hurt your credit rating.

There are a few reasons why this is the case:

Reduced credit history length: Credit history length makes up about 15% of your credit score. Losing an older account can decrease the average age of your active credit accounts, which can hurt your score.
Higher credit utilisation: Closing a credit card account reduces your available credit—your overall credit limit. This, in turn, can increase your credit utilisation ratio (how much credit you use compared to how much credit you "could" use). This is the second most crucial factor in your credit score, accounting for 30%.
Reduced credit mix: Credit scoring formulas give bonus points to borrowers who successfully manage different kinds of credit. Losing a credit card account can reduce the variety of your credit mix and add another hit to your credit score.

You should also keep in mind that a closed credit card isn't immediately removed from your credit reports. Your credit card's history of repayments will still be visible on your credit report for up to six years.

How can I reduce the impact on my credit score?

You can do a few things to reduce the credit score impact of one of your credit cards being closed due to inactivity.

First, have more than one credit card. When it comes to your credit score, having a few credit cards, each with a small limit, is better than having one or two cards with a larger limit.

For example, if you have six cards (each with the same credit limit) and you close one, your overall credit limit will only go down by 17%. But if you only have two cards and close one, your credit limit will decrease by 50%—a big difference.

Second, you can avoid having your cards closed by using them for small recurring purchases, like a Spotify subscription or something similar. You should pay special attention to the oldest credit cards, as the account age also matters for credit score.

However, if a card has an annual fee and you're not using it, it's not worth keeping it open for a slight credit boost. As long as you have enough other cards you can use, don't be afraid to "sacrifice" a younger account.

Third, if your card has been cancelled but you want to keep it, contact the credit card company.

But be warned: not all lenders will reinstate the account, and the ones that do might run you through a credit check. If you have had other loan applications recently, it might be best to let the credit card stay closed – too many hard checks can hurt your credit score.

Finally, one more thing you can do to reduce the impact of a closed credit card on your credit score: download a credit-building tool like Wollit.

Wollit reports your monthly subscription as a loan repayment to credit reference agencies. In this way, it's similar to a well-managed credit card, as it helps you build a history of timely credit repayments.

The big difference is that Wollit, by not being a credit card, doesn't come with the risk of high interest rates and fees, account default, or accidentally hitting your credit limit. You simply pay the monthly subscription and see your credit history build over time.