Fingerhut has been around since 1948. The company operates largely by extending shoppers credit lines that can be used to buy items from the Fingerhut catalog or at select partner businesses. Over time, a shopper may even qualify for a credit card that can be used anywhere. But not everyone continues to use Fingerhut. It isn’t uncommon for people to leave their accounts sitting open and unused. If you’re wondering whether an unused Fingerhut account affects your credit score. Here’s what you need to know.
How Fingerhut Credit Options Work
Mainly, Fingerhut targets consumers with less-than-perfect credit histories. Many have turned to the company to make purchases or even try and improve their credit scores. The company offers two main credit options: an installment loan and a store credit card-style account.
With the installment loan, the credit line is somewhat finite in nature. Usually, this account helps borrowers show that they can repay what they owe responsibly. After making a purchase, the borrower repays the principal and any applicable finance charges. Then, once they finish repaying, they might qualify for the store card-style account.
The credit account functions like a store credit card. It’s revolving, so users can make additional purchases whenever there’s enough room on their account. This option comes with a pretty high annual interest rate of 29.99 percent.
If a borrower keeps using their Fingerhut credit account responsibly, they might be able to convert their store card into a regular credit card. Then, they can use it at stores besides Fingerhut.
Fingerhut Credit Bureau Reporting
No matter which kind of account a borrower has, Fingerhut reports the activity to all three major credit bureaus. This means the size of the credit line, as well as other details, like payment history, make their way onto your credit report.
Depending on how a borrower uses or treats their Fingerhut account, they can impact their credit score. For example, making all of your payments on time and not maxing out your credit line could boost your score if you don’t have great credit. In contrast, reaching your credit limit or missing payments could hurt your score.
How an Unused Fingerhut Account Affects Credit Scores
If a revolving credit account is unused but open, it still impacts your credit score. First, the limit on that account is part of your available credit, a number that shows how much credit you can access practically immediately. Second, it affects your credit utilization ratio, a reflection of how much available credit you have, and how much credit you are using.
Both your available credit amount and credit utilization ratio are part of your credit score calculations. In some cases, your available credit amount can harm your credit or, at least, make it harder to obtain new credit. However, that depends on a variety of factors, including how large your Fingerhut credit line is and how much other credit you have available.
The impact of your credit utilization ratio can be fairly dramatic. If your unused Fingerhut account helps you keep your ratio low, say at 30 percent or less, it’s having a positive impact in that area. If, by closing your Fingerhut account, your credit utilization goes up substantially, then leaving it open might be a better choice.
Finally, your Fingerhut account’s age plays a role in your credit score. The average age of your accounts does impact your credit. Usually, the higher the average age, the better. If closing your account lowers the average age of your open accounts, such a move could cause your score to fall.
Should You Close an Unused Fingerhut Account?
Whether closing a revolving Fingerhut account is a smart idea depends on your unique situation. If leaving it open means you are tempted to acquire more debt, you might want to shut it down to avoid that situation.
Otherwise, you need to examine your situation carefully. For example, are you planning on opening a new credit account in the near future? Would closing the account dramatically raise your credit utilization ratio? Is your current credit score good, great, or exceptional, and could potentially weather a slight decrease?
Every person’s credit score situation is different. You need to examine how various factors might raise or lower your score. That way, you can decide if closing the account is right for you.
Do you have an unused Fingerhut account? What about a credit card? Are you worried about how it impacts your credit score? Share your thoughts in the comments below.
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