Your Credit Card: Use It, Or Possibly Lose It

CHICAGO (CBS) -- If you're someone who pays your credit card bills on time – and in full -- you probably consider yourself a good customer, right?

Well, if you're doing that, but not using your credit card enough, you may be at risk of having it cancelled. And that  can cause big problems with your credit score, CBS 2's Rob Johnson reports.

Kevin Hicks couldn't believe it when, in early January, a Wells Fargo credit card with a $37,000 limit was suddenly cancelled by the bank.

"I was shocked. I've had that card for 10 years, and it's a huge part of my credit score," he said.

His credit score dropped 60 points to 705. Why?

DePaul University banking professor Rebel Cole says that can happen to anyone if a card with the longest history and the largest credit limit goes away.

According to myfico.com, how long you've had credit accounts for 15 percent of your credit score. How much credit you're using, compared to how much you have available, makes up another 30 percent.

So, if your credit score suddenly dropped 60 points, say from 740 to 680, here's how it would impact your ability to borrow money:

Your interest rate on a 60-month loan for a new $25,000 car would jump from just over 5 percent to nearly 9 percent. That means your monthly payment would increase from $472 to $516.

Over the life of the loan, you'd pay an extra $2,600 dollars in interest.

Cole's advice: Even if you pay your cards off in full every month, make sure you use them.

"You need to use your credit card to keep your credit score in good standing and to keep your credit available," Cole says. "If you don't use the credit, they'll take it away from you and then you won't have it available when you need it the most."

Hicks understands now. His main option is to begin the painstaking process of rebuilding his credit.

This is just one of the unintended consequences of the new credit-card law that was intended to protect consumers. Cole says all the banks are required to do is to notify you, even as they are cancelling the card.   

Wells Fargo says banks are required to give 30 days' notice.