Does Closing A Credit Card Affect Credit Score?

One of the most common questions among credit card users is “Will closing credit card affect CIBIL score?” This article will provide valuable insights into how credit card closure affects credit scores and the steps credit card holders must take to maintain their creditworthiness.

What Happens When You Close Your Credit Card?

When you close a credit card, you can no longer use the card to make purchases or payments, and the length of your credit history decreases. 

Since a credit card is essentially a loan from the bank, closing the card will mean the loan has been completed. Credit bureaus will no longer receive information about the card and your credit history.

Does Closing A Credit Card Affect Credit Score?


Closing a credit card will negatively impact your credit score. You will see a decrease in your score as bureaus don’t have access to your credit information or behavior anymore.

Closing a credit card will remove the associated credit history and lowers the average length of your credit history.

Additionally, it impacts your credit utilization ratio. When a credit card is closed, your credit utilization ratio will increase as your overall credit availability reduces. This may contribute to your credit score reduction.

When Should I Close A Credit Card?

While closing a credit card can show a negative impact on your credit score, it does not imply that you must never close a credit card. 

Here are some instances where closing a credit card benefits you. 

Debt Management

If you are having a hard time managing your debt, then a credit card will prove to be an additional burden. Credit cards offer you a way to live beyond your means which will only leave you with more debt. 

High Annual Fees

Some credit cards carry a hefty annual fee with no benefits. In such cases, it is wise to close the card and take one that has less or no annual fee. 

Moreover, if you seldom use a credit card but pay a hefty annual fee for its maintenance, closing it is the right decision. 

High-Interest Rate

If your credit card carries a high rate of interest, then close the card to save yourself from debt. 

What Are Other Alternatives To Closing A Credit Card?

Instead of closing a credit card and losing your creditworthiness, you can simply opt for any one of the following alternatives. 

Go For A Downgrade

If your card has a high annual fee and offers no benefits, then downgrade to a card with less or no annual fees. Not only will you keep your credit open, but you will also avoid paying excess charges. 

Open New Credit

One way to salvage your credit score from dipping when you close a credit card is by opening new credit. This way, your credit history will increase and consistent credit card payments will keep your credit score high. 

Use Credit Card Sparingly

The most effective way to keep your credit card active if you have a little credit history is to keep it open and pay a regular monthly bill with it. Maintaining that line of credit will prevent it from closing due to inactivity and protect your credit score from decreasing.


Credit card closings should be done strategically. If you choose to cancel your card, make sure it is because you have a good reason. Canceling a credit card will not improve your credit score and it won't remove a negative account from your report either. 

If you find yourself in a position where it is necessary to close your account, be strategic about when and how you do so.


You can take a new credit card or small loan and pay off the bills in EMIs to maintain your credit score.

No. Keep your unused credit cards open by making small payments now and then as they will report favorable information to the credit bureaus each month. When the card doesn't charge an annual fee, it pays to keep it open.

No. Late payments or defaults will appear on your credit report and affect your credit score. It will also make it harder for you to get loans or new credit cards in the future. 

Inactivity on credit cards for a certain amount of time, 12 months or more, will cause them to close automatically. This will reflect on your credit report and can decrease your credit score. 

Credit Score Related Links

Was this information useful?

300 characters allowed (alphanumeric and special characters such as comma, full stop, @, ", &)

Thank you. Your feedback is important to us.

Green Tick Success

Thank you for your interest!

We will reach out to you shortly