Credit Score Articles

Inactive cards can still affect consumer credit scores

Contrary to what consumers may believe, not activating a new credit card can still affect their credit score.

The reason for this is that credit card issuers and other financial institutions have, by giving a consumer a new card, increased their overall credit availability, and in doing so changed how their credit score is calculated, according to an article on the news site Huliq.

The article explains that a consumer's score may go up because he or she is using a smaller percentage of the credit he or she has been extended. In some cases the increased credit limit could actually affect the credit score.

However, one move that may seem logical - canceling the card before activating it - also has a negative impact on a consumer's credit score.

The best way to manage a credit score, the article says, is to request a credit report every four months so that a consumer can more effectively stay on top of the fluctuations in his or her score and therefore better manage and control it.

However, while the calculation of credit scores can be a bit confusing, there is one thing that, while popularly believed to hurt a consumer's credit score, does not.

A new report in the New York Times found that placing fraud alerts on one's credit file is in no way damaging to a credit score. The Times, fact-checking a report in another newspaper, asked several credit experts whether such alerts could damage a credit score, and the answer from all of them was no. In fact, a spokesman for FICO, which has one of the most popular formulas for credit scores, said that such alerts aren't factored in at all.

The problem, the Times said, is that a years-old class-action lawsuit against one company that provided such warnings every 90 days, ostensibly to help prevent cases of fraud, alleged that these warnings were harmful to credit scores based on a number of reports from people involved in the suit. However, these reports were merely a coincidence.

The new belief is that these alerts may delay a consumer's ability to get a loan, but not damage their credit score in doing so.