How does closing a credit card account affect your CIBIL score

With multiple banks offering variety of credit cards to suite various needs of an individual, having multiple cards is not uncommon.

But managing multiple cards effectively becomes a challenge and many a times the card holder gets lured by various marketing initiatives and over spends on the credit cards. In case you are one of such card holders and are planning to cancel your cards, please consider the following prior to taking a step in this direction.

Credit card is one of those credit instruments that gives you access to funding at any point of time. The flexibility that the card extends does not only adds to comfort but more importantly has a lot of positive bearing on one’s score if utilized properly.

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Closing down credit card accounts while prevents one from over exposure to credit, and one should evaluate this option but it is important to be careful while closing your account, since it can affect your cibil score.

Since the credit score is an outcome of the way one utilizes his credit, a credit card becomes an important instrument in impacting the score. Repayment patterns and length of credit accounts grossly impact the credit scores of an individual. All other loan accounts get paid off over a period of time. A personal loan for example, has an average shelf life of about 3 years, an auto loan also on an average get paid off in about 3 years. Even a housing loan, that generally is taken with a repayment period of 20 years also get closed by paying complete outstanding amount in about 12 years. While on other hand, a credit card continues to exist for a very long time, and thus continue to impact the credit health of card holder positively.

Also, this is the only instrument where a person can hold multiple accounts with ease without having to worry about fixed monthly payments. Thus it is advisable that a person should rather having the cards cancelled, continues to hold them. He can choose not to use them regularly and for day to day purchases. But can use them once in a while to keep his credit health active and positive.

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