What do I do if I have a balance or limit of Zero on my accounts?

Your credit account balance is a factor that will affect your credit score. If you have a high balance, this can negatively affect your credit score, but having a balance of zero could potentially harm your credit score too.

What does having a zero balance mean?

Having a zero balance on a credit account can mean one of two things. Firstly, a zero balance could mean that you are paying off your credit in full every month and this is a good thing. On the other hand, a zero balance can mean that you have not been using the credit account.

What will happen if I’m not using an account?

If you are not using a credit account, the credit provider may stop issuing information to the credit bureaus about this account. This can negatively impact your credit score. The credit bureaus rely on credit providers to give updates as to the status of people’s accounts. Ultimately, after a certain time of inactively on the account, the credit provider may even close the credit account.

What does it matter if a credit account that I’m not using gets closed?

The closing of a credit account will lower your available credit and your credit utilization. This is because your credit utilization looks at your total available credit. If an account that has a high limit gets closed due to inactivity, this will increase your credit utilization, even if you’re not spending any more than usual.

Secondly, closing an account due to inactivity will lower the average age of your accounts. Credit scoring models look at the average age of your credit accounts, as in the credit world, old and wise trumps shiny and new. If you have 2 credit accounts and you opened the one 10 years ago and the other 4 years ago, the average age of your accounts is 7 years. If the account that was opened 10 years ago gets closed due to inactivity, this will seriously decrease the average age of your accounts and it will affect your credit score.

In short, paying off your credit accounts every month so that there is a zero balance is a good thing; but having a zero balance on an account due to inactivity is a bad thing and this could affect your credit score. Rather use the account for small purchases so that you can keep it active.