Closing Old Credit Cards: Will It Reduce Your CIBIL Score?

"Closure of old credit cards will surely impact your CIBIL score." It looks very logical but is far too conclusive. Closure of an old credit card is not necessarily going to have a bad effect on the cibil score of a person. This depends upon the overall credit standing of the individual, their credit utilisation, the number of accounts that the individual has.

It is advisable for the borrower to get a credit score check before doing so.

What If An Old Credit Card Is Closed?

An old credit card could be one factor that helps make up the history of a person. The closure of such a card could reduce the credit limit available from the active profile, hence affecting the utilization ratio.

However, it is important to note that closure of a credit card does not mean that it is removed from the credit profile instantly. This is why cibil score vs credit score is essential to understand. CIBIL is a credit bureau, while a credit score is the numerical evaluation of the credit information.

In financial awareness terms, the person should look and check cibil score prior to closure of the account.

Our team at PrimeScore suggests that if a card has no annual fee and is well managed, keeping it open may sometimes be worth considering; if it is expensive or no longer useful, closure may still be reasonable.

Must Every Individual Retain Their Oldest Credit Card?

Certainly not.

An individual getting ready to take out a personal loan may prefer to maintain a consistent credit history; however, this does not imply that every card which is not being used needs to be kept open forever.

Some things that one needs to keep in mind while taking a decision about keeping an old card are:

1. Renewal or annual fee

2. Credit limit available

3. Balance on the credit account

4. Utilization ratio

5. Age of other credit accounts

6. Utility of the particular card

Also, it is a misconception that you need to have a credit card to have a cibil score, mind it!

What About Other CIBIL Myths?

Another statement that gets repeated quite often is that applying for multiple loans and credit cards definitely reduces your cibil score. Although making many enquiries could certainly impact your credit record, especially when done within a short time frame, the term “definitely” makes the whole process too simplistic.

Similarly, having a good credit score is important, but having no one particular score ensures the approval of a loan or a credit card. Knowing the credit score range may give you an idea, as well as the other aspects such as income and repayments will be considered by lenders.

When looking for a paisa bazaar credit score check or bankbazaar credit score, a borrower should keep in mind that online services can help you get the information, yet the real report from the bureau needs to be analyzed.

PrimeScore can help borrowers review credit-report information and identify discrepancies that may require rectification.

What Should One Do Prior to Shutting a Credit Card?

It is always wise to check credit score and the report before closing the credit card account. Getting a free credit score or check credit score free may give one an initial idea, but the information specific to the account is more relevant.

In case the borrower wants to know how to increase credit score, the borrower needs to ensure that repayments are made on time, the utilization rate is managed, and no applications are made, as opposed to keeping all the cards open just because it is old.

Similarly, in case one wants to get a loan for low credit score, one should not close or open accounts because of a certain online article.

Check your report, understand the consequences and then decide whether closing the card actually makes financial sense.

FAQs

1. Will closing the existing credit card always affect the CIBIL score negatively?

No. Closing will not automatically affect the CIBIL score and depends upon many factors like utilization, credit history and the rest of accounts.

2. Is it always beneficial to keep the old credit card?

No. Other factors that have to be kept in mind while doing so include the fees, utilisation, credit limit and the financial standing of the borrower.

3. Can there be a CIBIL score without a credit card?

Yes. Credit history can be built by means of credit from some other source.

4. Will applying for multiple loans always lead to a reduction in CIBIL score?

It could do so since multiple hard enquiries could affect negatively but depends upon the entire credit standing.

5. Is it wise for someone to review their report before closing the credit card?

Yes. It is a good practice since it helps the borrower make an informed decision about the same.