Thinking of closing your credit card? Here’s how it impacts your credit score
One of the most underestimated consequences of closing a credit card is its impact on credit age. Credit bureaus track how long you have been using credit, and older accounts play a critical role in that calculation.
As the year draws to a close, many Indians find themselves doing a financial reset. We review expenses, tidy up subscriptions, and often take a hard look at the credit cards sitting unused in our wallets. Closing an underutilised credit card can feel like a sensible move. Fewer accounts, less temptation, better control. But credit decisions are rarely just administrative. According to Manish Shara, Co-founder and CEO of ZET, a seemingly harmless credit closure can quietly reshape your credit profile in ways that only become visible when you need credit most. As awareness of credit scores grows in India, it is worth understanding why closing a credit card warrants more consideration than it typically receives.
Why Your Oldest Card Matters More Than You Think
One of the most underestimated consequences of closing a credit card is its impact on credit age. Credit bureaus track how long you have been using credit, and older accounts play a critical role in that calculation. If the card you close happens to be your first or oldest one, your average credit age can drop overnight.
"A longer credit history signals reliability. It shows lenders that you have been trusted with credit over time and have managed it responsibly. For many consumers, that first credit card is the foundation of their entire credit journey. Removing it can make an otherwise healthy profile look younger and less established, even if repayment behaviour has been flawless," said Shara.
Less Available Credit Can Hurt More Than Overspending
Another effect often catches borrowers off guard. Closing a credit card reduces your total available credit limit. If your spending on other cards remains unchanged, your credit utilisation ratio automatically increases.
"Credit utilisation is a strong indicator of risk. A higher ratio suggests heavier reliance on credit, which can pull down your score, even if you have never missed a payment. Many consumers are surprised to see their score dip after closing a card, especially when they believed they were doing the “responsible” thing," he added.
Fewer Cards Can Mean a Thinner Credit Story
Credit cards play an important role in shaping your unsecured credit profile. Closing one reduces the number of active accounts contributing to your credit mix. While this may not matter much for someone with a wide portfolio, it can be meaningful for borrowers with limited credit history.
For instance, if you have one credit card alongside a loan or a buy-now-pay-later product, closing that card removes an entire category of credit from your profile. Lenders generally prefer to see responsible behaviour across different types of credit rather than reliance on a single product.
Treat Your Oldest Card with Extra Care
An older credit card does more than just add years to your credit history. It reflects consistency. It shows how you have managed limits, repayments, and usage patterns over time. Closing such a card can unintentionally reset that perception.
This becomes especially relevant if you are planning a home loan, car loan, or business loan. Lenders tend to reward stability, and a long-standing credit card quietly reinforces that narrative. Even if the card is rarely used, keeping it active with small, occasional transactions can help preserve its value in your credit profile.
When Closing A Card Actually Makes Sense
That said, closing a credit card is not always the wrong move. Cards with high annual fees and limited benefits may no longer justify their cost. Similarly, cards taken impulsively or used briefly may add little long-term value.
If a card is relatively new and you already have older, well-maintained cards, closing it is less likely to affect your credit age meaningfully. What matters is sequencing. Clearing all dues before closure and ensuring that stronger accounts remain active can minimise any negative impact.
Credit Health Rewards Thoughtful Decisions
Credit scores are built slowly and influenced by patterns, not one-time actions. Closing a credit card should be a considered decision, not a reflexive clean-up exercise. In most cases, retaining older, low-cost cards while letting go of newer or less useful ones leads to better outcomes.
"As more Indians take ownership of their credit health, the focus needs to shift from quick fixes to informed choices. When it comes to credit cards, sometimes keeping what you already have is the smartest move you can make," Shara concluded.
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