| Overview: Closing a credit card can impact your credit score by altering credit utilisation and credit history length. This may lead to a drop in your score, affecting future credit approvals. Knowing the specific factors involved will help you manage your credit health wisely before making any closure decisions. |
Think Twice Before You Close That Card
In India, more people are using credit cards than ever—credit card issuance crossed 108 million in 2024, according to RBI data. Yet, many opt for credit card closing without fully understanding the consequences. Whether it’s due to high fees or infrequent use, the decision to cancel a credit card can significantly impact your credit score.
How Credit Scores Work in India
Your credit score is a three-digit number (300–900) calculated by agencies like CIBIL, Experian, Equifax, and CRIF High Mark. Lenders use this score to evaluate your creditworthiness.
Components of Your Credit Score:
- Credit Utilisation Ratio (30%)
- Payment History (35%)
- Length of Credit History (15%)
- Types of Credit Used (10%)
- Recent Credit Inquiries (10%)
Why People Consider Credit Card Closing
Many people decide on credit card closing for reasons like:
- High annual fees or joining charges
- Low usage or duplication with other cards
- To avoid debt temptation
- Switching to cards with better benefits
- Unsatisfactory customer service
| What You Must Know: Credit card closure doesn’t erase history—it stays on your report for years. |
How Closing a Credit Card Affects Your Credit Score
Even the simple act of closing a credit card can trigger surprising changes in your credit profile.
1. Increases Your Credit Utilisation Ratio
Let’s say your total credit limit across three cards is ₹3,00,000 and you use ₹60,000. Your utilisation ratio is 20%. Now, if you close one card with a ₹1,00,000 limit, your available credit drops to ₹2,00,000—raising utilisation to 30%, which can lower your score.
| Before Closure | After Closure |
| Limit: ₹3,00,000 | Limit: ₹2,00,000 |
| Usage: ₹60,000 | Usage: ₹60,000 |
| Utilisation: 20% | Utilisation: 30% |
A utilisation ratio above 30% is viewed negatively by most Indian lenders.
| Mistakes to Avoid: Never close your oldest credit card—it builds your credit history. |
2. Shortens Your Credit History
The length of your credit history plays a key role in your credit score. Closing your oldest credit card can reduce the average age of your accounts, which may lower your score and weaken your credit profile.
3. Reduces Credit Mix
A healthy credit mix includes both secured and unsecured credit. Closing your only credit card limits diversity and impacts your creditworthiness.
4. Can Affect Future Credit Eligibility
Even if the score doesn’t drop drastically, credit card closing may raise doubts among lenders about financial reliability, especially during manual reviews.
| Facts to Know: RBI mandates that credit card providers must close accounts within 7 working days after full repayment and formal request. |
When Does Closing a Credit Card Not Hurt?
In the below scenarios, the impact may be minimal—but caution is still advised.
- If the card is new and unused
- If you have multiple cards and high remaining credit limits
- If you are already paying annual fees but not using the card
Steps to Close a Credit Card Safely
If you’ve weighed the consequences and still wish to proceed:
Step-by-Step Process:
- Pay off all dues and pending EMIs
- Redeem accumulated rewards
- Call customer care or apply online for closure
- Obtain written confirmation of closure
- Check your CIBIL report after 45 days to confirm the update
Tools to Help You Stay on Track
Airtel Finance offers free credit score checks, helping you assess the impact of card closures. With easy access to personalised credit tools and the Airtel Axis Bank Credit Card, customers can enjoy better control over their financial habits. Track your credit health with Airtel Finance today.
Credit Card Closure and Secured Credit Score Recovery
While credit card closing might reduce your score temporarily, you can build it back:
- Use remaining cards responsibly
- Maintain a low utilisation ratio (<30%)
- Avoid multiple loan inquiries
For serious impacts, you can even consider converting credit card debt into manageable loan repayments.
Smart Closure, Smarter Financial Choices
Credit card closing may feel responsible but can dent your credit score if not done strategically. Preserve your credit health with tools that support smart credit management. Airtel Finance offers credit score monitoring and the Airtel Axis Bank Credit Card—making responsible credit handling simpler than ever. Manage your credit better with Airtel Finance solutions today.
FAQs
1. Does closing a credit card affect my credit score?
Yes, it may increase utilisation ratio and shorten credit history, lowering your credit score.
2. How long does a closed credit card stay on my credit report?
Closed accounts typically remain on your credit report for up to seven years.
3. Should I close my oldest credit card first?
No, closing your oldest card reduces your credit history length, affecting your score.
4. What’s the best time to close a credit card?
Only after full repayment, low utilisation, and a stable credit profile is ensured.
5. Can I close a credit card if I have a low CIBIL score?
Yes, but if you have a low CIBIL score, closure might worsen your credit profile.
