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Lack of credit use can result in loss of credit scores

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Topics addressed on April 2, 2008:

Lack of credit use can result in loss of credit scores

Dear Max,

I used to have a credit score around 620 but paid cash for all of my purchases over the last several years. Now I don't have a score any longer. Is that common? If so, how long can I expect it to take to generate a new score? What is the best way to do it?

- ERC

Dear ERC,

You only have a credit score if you have an active credit history. Because you haven’t used credit for some time, there is no basis for credit scoring systems to be able to predict your repayment behavior.

Some credit scoring systems cannot calculate a score if no balance is reported to the credit history within the last six months. In other systems, there must be a balance update or inquiry within 12 months, and others require a balance update or inquiry within 24 months.

So, you may have a very easy solution to your problem. If you still have open but unused credit card accounts, simply start using the credit cards again. Make sure you make all your payments on time, and pay your balances in full each month so you don’t pay finance charges and your balances stay low. Soon you’ll have a great score.

If you don’t have existing credit card accounts you will need to open new credit and start using the account. In time you will rebuild your credit history and have great scores.

Thanks for asking.

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