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Having a credit card with zero activity over a long period of time is bad for your credit utilization ratio. How so? Let’s delve further into this.

Mind Your Credit Utilization Ratio

Your credit utilization rate is the ratio of your total credit card balances to your total credit limit. It constitutes a big chunk of your credit score, thus more or less indicative of one’s credit worthiness or risk. If your credit utilization rate is high, say 80%, credit bureaus will see you as credit dependent or financially unstable. If it’s low, say a consistent zero rate appears on your report, it only means you don’t have enough credit history and your credit file needs a critical boost. You have to revive inactive credit accounts to break off your thinning credit file. This is not to say maxing out credit cards will help boost your score. Under 30% remains the ideal rate for achieving a good score.

Credit Cards Are One Of Your Best Tools

Credit cards are best for building credit. When used wisely, that is, not maxing out credit use above 75% of your total available credit, credit cards are your best bet for improving your credit score. To lenders, consumers with lower utilization rates are more responsible (and less desperate or not at all) when it comes to handling credit.

How low can you ideally go? As mentioned, you should aim for up to 30% of your total available credit to build credit and not carry debt by paying your balance in full. Once you pay off your balance, your credit utilization rate goes back to 0% so you have to continue purchasing items until you reach the ideal credit utilization rate of 30%. That, and again pay what you owe each month.