You might think that just because you are financially responsible, with no debt and a responsible borrowing history, that your credit score would undoubtedly reflect that. But you may actually not be providing the credit bureaus with enough information to help your credit score if you do not use your credit card.
That lack of credit card use could leave your credit report "unscoreable." In fact, some 50 million Americans have too little credit activity to qualify for the most commonly used credit score.
If you do not use any credit for six months, the credit bureaus may be unable to calculate your credit score. While you should still be able to borrow money under these circumstances, any approvals will take longer and you might end up paying a higher interest rate.
Even positive information only stays on your credit history for so long, so it is important to show that you have paid off recent debts. As older auto loans and mortgages disappear from your credit history, replace them with an ongoing display of responsible use of credit cards.
Just a little credit card use is enough to keep your credit score up-to-date. All it takes are some charges on your plastic, and then the quick payment of your credit card bill. These charges could be as small as using your credit card for groceries or gas -- which could also earn you a little something in return if you pay with cash back credit cards or reward credit cards.
You may wonder why credit scores matter if you do not plan to borrow any money. But should you find yourself in an emergency and needing a home-equity line of credit immediately, or you buy a second home and require a mortgage, a solid credit history is crucial. Additionally, the rate on your homeowners and auto insurance could be influenced by your credit history.
As a result, it is a smart move to stay aware of your own personal credit history, which is used to calculate your credit score. You can order a free credit report every 12 months from the three major credit bureaus -- Equifax, Experian, and TransUnion.
Meanwhile, it is not only people who prefer paying by cash, check or debit card that may find themselves without a credit score. If you have lived abroad for some time and have not used a U.S. credit card while overseas, you could find yourself without a credit score on your return home.
Therefore, many Americans will see their credit histories benefited by consistent use of a credit card and prompt repayment of their bills.