Closing a credit card can temporarily lower your credit score for two main reasons:
Your total available credit decreases, which can raise your credit-utilisation ratio (the percentage of credit you use).
If it’s one of your oldest cards, closing it can reduce the average age of your accounts, which lenders like to see for stability.
Understanding these impacts helps you plan closures without hurting your credit unnecessarily.
Step 1: Manage Your Credit Utilisation
Check your current utilisation before closing any card. For example:
Total credit limit: Rs 3,00,000
Current balance: Rs 30,000 → utilisation = 10%
Closing a Rs 1,00,000-limit card → utilisation jumps to 15%
Aim to keep utilisation below 30%, ideally under 10% for a “perfect” credit profile.
You can achieve this by:
Paying down balances before the statement date
Shifting some spending to debit for a short time
Requesting a credit limit increase on another card
Step 2: Don’t Lose Account Age
Your oldest card is valuable, even if rarely used. To keep its benefits:
Request a downgrade to a no-fee version to retain the original open date
If downgrades aren’t allowed, keep the card active with a small recurring payment, like a music or cloud subscription, on autopay
Step 3: Move Credit Limits
If you have multiple cards with the same bank, ask to transfer most of the old card’s credit limit to another card.
This keeps your total available credit steady, avoiding a sudden spike in utilisation.
Even a partial transfer helps.
Step 4: Time Closures Around Other Applications
If you plan to apply for a mortgage, car loan, or premium credit card, avoid closing accounts for 60–90 days before the application.
Keep accounts stable—no new inquiries, no closures, no unexpected balances.
Close cards only after the new loan or card is fully processed.
Step 5: Understand Long-Term Effects
Closed accounts in good standing remain on your credit report for years and continue contributing to your credit age.
Most short-term dips in your score come from utilisation changes, which can be managed proactively.
When It Makes Sense to Close a Card
Closing is reasonable if:
The card’s annual fee outweighs benefits
The issuer refuses to downgrade
You’ve prepared by lowering utilisation and reallocating limits
Also, close cards gradually, spacing closures over a few months to maintain a stable profile.
Quick Playbook for Safe Closures
Request a downgrade or retention offer to keep the card free and useful
Shift most credit limits to another card with the same bank
Pay down balances elsewhere to maintain low utilisation
Keep a small recurring charge if retaining the card
Close only after major applications are finalized
Check your credit report a month later to ensure closure is reported correctly and positive history remains
Bottom Line
Close credit cards deliberately, not emotionally.
Protect your utilisation, preserve your oldest accounts when possible, and time closures around important applications.
Doing this keeps your credit score steady while helping you save on fees and simplify your wallet.
