How Does Closing a Credit Card Affect Credit Score?

Credit Score

A prediction of your credit behaviour & how likely you are to repay a loan on time based on your credit reports.

Ideal Credit Score

An ideal CIBIL score should be 750 or above to fulfill the eligibility criteria for a credit card or loans.

Credit Score

Affect of Closing Credit Card on CIBIL Score

Closing credit cards can effectively increase your credit utilisation ratio, which would decrease your CIBIL score.

Credit Utilization Ratio

It represents the amount of revolving credit you're using divided by the total credit available to you.

Effect of a Negative CIBIL Score

It will remain on your credit report for around 7 years, & based on this information, lenders will analyse your repayment behaviours.

5 C’s to Consider Before Closing

Calculate the impact on your credit score. Clear all outstanding dues. Carefully go through the closure policies. Call off auto-payments. Check your credit report.

Calculate the Impact

Closing a card reduces the available credit, & leads to an increase in credit utilisation ratio. If this ratio does not get affected, you can close safely.

Clear the Dues

It is impossible to close the credit card account before clearing all remaining dues.

Closure Policies

Read all policy-related documents carefully to close off your credit card account without paying any charges or penalties.

Call off Auto-Payments

Cancel the auto-payment instruction for utility bills or other subscriptions. If not done, then the bank will continue to charge on the closed card.

Check Your Credit Report

It is crucial because any mistakes or inconsistencies will remain for the next 7-10 years in your credit report & repayment history .

Advantages of Closing Credit Card

Prevents over expenditure. Reduces your overall debt. Reduces the chances of identity theft. Retains the payment history.

Disadvantages of Closing Credit Card

Increases credit utilisation ratio. Shortens your credit history. Impacts credit score.