Does Not Using a Credit Card Hurt Your Score? Find Out!
Your credit score plays a crucial role in your financial well-being. Whether you’re applying for a loan, a new credit card, or even renting an apartment, lenders and financial institutions assess your credit score to determine your creditworthiness.
But what happens if you don’t use your credit card? Does not using a credit card hurt your credit score?
In this article, we’ll explore how credit inactivity affects your financial health, how credit cards affect credit scores, and the role of credit utilisation in determining your creditworthiness.
We’ll also highlight how Emvertex Credit can help you manage your credit effectively.
Table of Content
Understanding Your Credit Score
In Singapore, your credit score is a numerical measure of your creditworthiness, ranging from 1000 to 2000, with higher scores indicating lower risk. The Credit Bureau Singapore (CBS) calculates this score based on several factors:
1. Utilisation Pattern
The proportion of your available credit that you use. Maintaining a low utilisation rate is beneficial.
2. Recent Credit
The number of recently opened credit accounts. Opening multiple accounts in a short period can negatively impact your score.
3. Account Delinquency Data
Records of late or missed payments. Consistently meeting payment deadlines is crucial.
4. Credit Account History
The length of time your credit accounts have been active. Longer histories with positive activity can improve your score.
5. Available Credit
The total credit limit available to you. Having access to credit without fully utilising it can be advantageous.
Lenders use your CBS credit score to assess the risk of extending credit to you. A higher score increases your chances of loan approvals and may result in more favourable interest rates.
Regularly reviewing your credit report and understanding these factors can help you maintain or improve your credit standing.
Take control of your finances with the right plan. See how a debt management plan can support your journey:
Does Not Using a Credit Card Hurt Your Credit Score?
The answer is yes, not using your credit card can hurt your credit score in the long run. While it might seem like avoiding credit usage keeps you financially safe, inactivity can have negative effects.
Here’s why:
- Your credit card account could be closed – Credit card issuers may close inactive accounts, reducing your total available credit.
- It shortens your credit history – Closing old accounts reduces the average age of your credit accounts, which can lower your score.
- You may lose positive payment history – A closed account means you lose a portion of your payment history, which is a key factor in your credit score.
Regularly using your credit card – even for small purchases – helps maintain an active account and keeps your score healthy.
Credit Inactivity Effects: Why Not Using Your Card Can Be Risky
Credit inactivity effects can impact your financial profile in several ways:
1. Drop in Credit Score
When your credit utilisation drops to zero due to inactivity, credit scoring models may not have enough data to assess your behaviour, potentially leading to a lower score.
2. Difficulty Getting Loans
If you don’t use your credit card at all, lenders may view your credit profile as inactive, making it harder to qualify for new credit.
3. Increased Risk of Account Closure
Banks and credit card issuers may close inactive accounts, reducing your available credit and increasing your credit utilisation ratio (if you have other debts).
To avoid these risks, consider making small, regular purchases and paying them off on time.
How Credit Cards Affect Your Credit Score
Credit cards can either help or hurt your credit score, depending on how you use them. Here’s how:
| How Credit Cards Help | How Credit Cards Hurt |
|---|---|
|
Paying on time improves your credit score. |
Paying late lowers your credit score. |
|
Keeping a credit card for years builds credit history. |
Canceling old cards shortens your credit history.
|
|
Using less than 30% of your credit limit shows good money management. |
Using more than 30% of your limit makes you look financially stressed. |
|
Having a credit card adds to your credit mix, which boosts your score. |
Applying for too many new credit cards can temporarily lower your score. |
Understanding how credit cards affect your credit score can help you make better financial decisions.
Credit Utilisation Role in Maintaining a Healthy Score
Credit utilisation is the percentage of your available credit that you are using. It plays a significant role in your credit score.
- Low Credit Utilisation (0-30%) – Ideal for maintaining a good score.
- Moderate Credit Utilisation (30-50%) – Can slightly lower your score.
- High Credit Utilisation (Above 50%) – Indicates financial distress and may lower your score.
A credit utilisation rate below 30% is recommended. For example, if you have a credit limit of $10,000, you should aim to use less than $3,000 at any given time.
Credit Utilisation Role in Maintaining a Healthy Score
Credit utilisation is the percentage of your available credit that you are using. It plays a significant role in your credit score.
- Low Credit Utilisation (0-30%) – Ideal for maintaining a good score.
- Moderate Credit Utilisation (30-50%) – Can slightly lower your score.
- High Credit Utilisation (Above 50%) – Indicates financial distress and may lower your score.
A credit utilisation rate below 30% is recommended. For example, if you have a credit limit of $10,000, you should aim to use less than $3,000 at any given time.
How to Keep Your Credit Score Healthy Without Overspending
Maintaining a good credit score doesn’t mean you have to overspend.
Here are some simple strategies:
1. Use Your Credit Card for Small, Regular Purchases
Pay for subscriptions, groceries, or fuel with your credit card and pay off the balance in full.
2. Set Up Automatic Payments
Avoid late payments by automating your credit card payments.
3. Keep Old Credit Accounts Open
Even if you don’t use them often, older accounts help maintain a long credit history.
4. Monitor Your Credit Report
Regularly check your credit report for errors and dispute any inaccuracies.
5. Maintain a Low Credit Utilisation Rate
Keep your spending under 30% of your total available credit.
Why Work with Emvertex Credit for Better Credit Management?
If you’re struggling with maintaining your credit health or need financial guidance, Emvertex Credit can help. As a trusted licensed moneylender in Singapore, we offer:
- Personalised Financial Advice – Our experts help you understand how credit works and how to optimise your credit score.
- Debt Consolidation Plans – Reduce financial strain by consolidating multiple debts into one manageable loan.
- Flexible Loan Solutions – Get access to loans with competitive interest rates and customised repayment terms.
- Fast Approvals – Quick loan approvals so you can get the funds you need without delays.
By working with Emvertex Credit, you can take proactive steps toward improving your credit health while managing your finances responsibly.
Conclusion
Your credit score is a critical factor in your financial stability, and credit inactivity effects can negatively impact it if not managed properly.
Not using a credit card may lead to account closures, reduced credit history, and a lower credit score. By understanding how credit cards affect your credit score and keeping your credit utilisation low, you can maintain a strong financial profile.
If you need professional guidance to improve your credit score or manage your finances, Emvertex Credit is here to help.
📞 Reach out to us today to explore financial solutions tailored to your needs.
