Does Closing A Credit Card Affect CIBIL Score?

Closing a credit card is a big decision, and many people worry about how it might affect their CIBIL score.Your CIBIL score is important because it helps lenders decide if they should give you a loan or credit.So, what happens to your score if you close a credit card? Will it go down, stay the same, or even improve?In this blog post, we’ll explore this question and give you the information you need to make a smart choice.Table of ContentsWhat Is A Credit Score And Why Is It Important?A credit score is a number that tells lenders how reliable you are with borrowed money. It’s like a grade for your financial behavior.In India, the most common score is called the CIBIL score, ranging from 300 to 900.Credit score matters because it shows how trustworthy you are with money.If your score is high, lenders trust you more, so you can borrow money easily and at better rates.This affects things like getting a loan for a house or car, renting an apartment, and even finding a job. Having a good credit score means you’re responsible with money, which sets you up for a better financial future.Related – Credit Card Is Asset Or Liability?What Is a Credit Utilization Ratio?Credit utilization ratio is the amount of credit you use compared to what you have available. It’s important because it affects your credit score.For example, if your credit card has a 10,000 INR limit and you’ve spent 3,000 INR, then your ratio is 30%.Lenders look at this ratio to see if you’re using too much of your available credit. A lower ratio is better because it shows you’re not relying too much on borrowed money.If your ratio is high, it can hurt your credit score. Lenders might think you’re having trouble managing your debts.This could make it harder to get approved for loans or credit cards in the future, or you might get higher interest rates.How Length Of Credit History Affects Your Credit Score?The average age of your credit accounts is crucial because it affects your credit score. It’s the average time your credit accounts have been open.Lenders consider this when deciding whether to lend you money. They prefer accounts with a longer history because it shows you have experience managing credit responsibly.Closing old accounts or opening new ones can lower your average account age. This might lower your credit score because it makes your credit history look shorter.So, it’s wise to keep old accounts open, even if you don’t use them often. This helps maintain a longer credit history, which can boost your credit score.If you need to open a new account, try to do it sparingly. Each new account brings down your average age of accounts, which could impact your credit score.Related – How Much of My Credit Card Should I Use?Does closing a credit card affect CIBIL score?Closing a credit card reduces your available credit. If you have balances on other cards, this can increase your credit utilization ratio, which might lower your CIBIL score. Lenders prefer lower ratios as they show you’re not relying heavily on credit.However, the impact depends on your overall credit profile. If you have a strong history and low credit card balances, closing a card may not affect your score much. But if your history is short or you carry high balances, it could have a bigger impact.This is especially true for older cards, as closing them shortens your credit history, which lenders prefer to see longer.Keeping my credit score high has helped me a lot with money stuff. My score is always over 850. It helped me get a mortgage with a low interest rate, which saved me a ton of money.I check my credit report often to fix any mistakes fast. I also pay my bills on time and don’t use too much credit. These things keep my score high.It’s important to manage credit responsibly if you want good financial opportunities. So, if you want to make your money situation better, focus on these things.ConclusionClosing a credit card can affect your CIBIL score. To keep it healthy, monitor your report, pay bills on time, and use credit wisely. Take charge of your credit health for better financial opportunities.