Credit cards that have not yet been activated by the consumer will affect your credit score nonetheless even if your balance is zero at the time of receipt. Banks that issue credit cards will report the new available credit limit to the three main credit bureaus for inclusion in your credit report and will affect your FICO score.
This practice may seem strange to most consumer but one should realize that independent of card activation, the issuer and financial institution has actually increased the consumer’s credit availability which is part of the calculation used by Transunion, Equifax and Experian to determine your FICO score.
Let us look at it this way. Assume you have four credit cards each of which give you access to $1,000 for a total of $4,000 and all carry a balance of let’s say $100 or $400 in total. Upon the receipt of the new non-activated credit card with the same credit availability, but unused, the usage has now been reduced from 10%, as per our example, to 8% and will play a factor in your credit score calculation. It will have a positive effect on one side because of the reduction in usage but it may also affect you negatively because of a rise in credit extension.
The best thing to do in this case is to activate your card, but not use it. This will ascertain that your card is safe and in your possession so you can protect your identity and will not raise a red flag with your financial institution.
Negative Impact on Credit Score
Adversely, were you to increase your carry over balances and cancel the new unused or non-activated credit card, then your credit score will be negatively impacted.
With consumers now having access to 3 free credit reports per year, your score is easy to manage by simply putting together a schedule. Every four months, simply request one free credit report online, for example; in January place your request with Transunion, in May request Equifax for your free report and in the August-September timeframe ask Experian for your last report and repeat the same approach next year.
This will ensure that you have total control over your FICO score at no cost to you and are at all times aware of any potential abuse of your personal information that is stored in large internet datacenters.
Written by Nick Doms © 2010, all rights reserved.
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