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.
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.
Yes.
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.
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.
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.
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.
If your credit card carries a high rate of interest, then close the card to save yourself from debt.
Instead of closing a credit card and losing your creditworthiness, you can simply opt for any one of the following alternatives.
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.
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.
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.
Timely repayments, lengthy credit history, and a lower credit utilization ratio are the keys to improving your credit score in 30 days. Additionally, check your credit report regularly to ensure the accuracy of the information presented there. While you may not see a dramatic improvement in your score in just 30 days, your efforts toward increasing it will gradually help you reach the score you aim for.
No. It is not possible to increase your score by 200 points in just 30 days.
Yes. Depending on the changes you have made to the report, your CIBIL score may improve.
No. You can’t buy credit score points.
It may take anywhere between a few months to a year to build your credit score depending on the score you currently have and the score you wish to have.
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