Will Closing Old Credit Card Accounts Decrease Your CIBIL Score?

Many of us believe that closing a credit card we no longer use is a sign of financial discipline. You might think, "I don't need the temptation," or "Why pay an annual fee for a card I don't swipe?" However, in the world of credit scoring, older is almost always better. Closing an old credit card account can—and often does—decrease your CIBIL score. If you are planning to apply for a home loan or a car loan soon, this is a move you need to think about twice.

Why Closing an Old Credit Card Hurts Your Score

Your CIBIL score isn’t just about paying bills on time; it’s a complex calculation based on your behavior over time. Closing a card hits two major scoring factors:

1. The "Age of Credit" Factor

The length of your credit history accounts for a significant portion of your score. CIBIL looks at the Average Age of Accounts.

• The Logic: Lenders love "vintage" credit. It proves you’ve managed debt responsibly for years, not just weeks.

• The Impact: If you close a card you’ve had for 10 years and your next oldest card is only 2 years old, your average credit age will plummet, making you look like a less "experienced" borrower.

2. Credit Utilization Ratio (CUR)

This is the ratio of how much credit you are using compared to your total available limit.

• The Math: Suppose you have two cards, each with a limit of ₹1,00,000 (Total limit: ₹2,00,000). If you spend ₹50,000 a month, your CUR is 25%.

• The Impact: If you close one card, your total limit drops to ₹1,00,000. That same ₹50,000 spend now puts your CUR at 50%. CIBIL prefers a CUR below 30%; crossing this threshold signals "credit hungriness" and lowers your score. When Should You Actually Close a Card?

  While keeping cards open is generally better for your CIBIL score, there are a few exceptions where closing it might be the right call:

Scenario	Recommendation
High Annual Fees	If the fee outweighs the rewards and you can't downgrade.
Overspending Temptation	If the card leads to debt you cannot manage.
Security Risks	If the card was compromised or the issuer has poor security.

Closing an old credit card might feel like "cleaning up" your finances, but in the eyes of credit bureaus like CIBIL, it’s often seen as deleting a part of your financial resume. While it won't necessarily "destroy" your score, it almost always leads to a dip.

Here is a SEO-optimized blog post designed to educate readers on why this happens and how to manage it.

Will Closing Old Credit Card Accounts Decrease Your CIBIL Score?

Many of us believe that closing a credit card we no longer use is a sign of financial discipline. You might think, "I don't need the temptation," or "Why pay an annual fee for a card I don't swipe?" However, in the world of credit scoring, older is almost always better. Closing an old credit card account can—and often does—decrease your CIBIL score. If you are planning to apply for a home loan or a car loan soon, this is a move you need to think about twice.

Why Closing an Old Credit Card Hurts Your Score

Your CIBIL score isn’t just about paying bills on time; it’s a complex calculation based on your behavior over time. Closing a card hits two major scoring factors:

1. The "Age of Credit" Factor

The length of your credit history accounts for a significant portion of your score. CIBIL looks at the Average Age of Accounts.

• The Logic: Lenders love "vintage" credit. It proves you’ve managed debt responsibly for years, not just weeks.

• The Impact: If you close a card you’ve had for 10 years and your next oldest card is only 2 years old, your average credit age will plummet, making you look like a less "experienced" borrower.

2. Credit Utilization Ratio (CUR)

This is the ratio of how much credit you are using compared to your total available limit.

• The Math: Suppose you have two cards, each with a limit of ₹1,00,000 (Total limit: ₹2,00,000). If you spend ₹50,000 a month, your CUR is 25%.

• The Impact: If you close one card, your total limit drops to ₹1,00,000. That same ₹50,000 spend now puts your CUR at 50%. CIBIL prefers a CUR below 30%; crossing this threshold signals "credit hungriness" and lowers your score.

When Should You Actually Close a Card?

While keeping cards open is generally better for your CIBIL score, there are a few exceptions where closing it might be the right call:

Scenario	Recommendation
High Annual Fees	If the fee outweighs the rewards and you can't downgrade.
Overspending Temptation	If the card leads to debt you cannot manage.
Security Risks	If the card was compromised or the issuer has poor security.

Pro-Tips to Protect Your Score

If you’re leaning toward closing an account, follow these steps to minimize the damage:

1. Request a Downgrade: Instead of closing the account, ask the bank to switch you to a "Life Time Free" (LTF) card. This keeps the account age alive without the annual cost.

2. Increase Other Limits First: Before closing a card, ask your other credit card providers to increase your limits. This helps keep your overall Credit Utilization Ratio low.

3. The "Small Charge" Strategy: If you're keeping an old card just for the score, put one small recurring bill (like a streaming subscription) on it and set up Auto-Pay. This keeps the card active so the bank doesn't close it for inactivity.

Important Note: A closed account in "Good Standing" will stay on your report for up to 10 years, but the loss of the available credit limit happens immediately, which is why the score dip usually occurs in the next billing cycle.

The Bottom Line

Closing an old credit card account is a strategic decision. If your score is already 800+, a small dip might not matter. But if you're hovering around 700-750, that "cleanup" could cost you a favorable interest rate on your next big loan.