Closing old credit accounts can, to some extent, affect your CIBIL score positively or adversely based on an interplay of factors. However, the impact on credit score hinges on a slew of factors.
Credit utilisation ratio: Closing old credit accounts can affect your credit utilisation ratio, which is the amount of credit you're using compared to the total credit available to you.
If you close an old credit account with a high credit limit and you carry balances on other accounts, your credit utilisation ratio may increase, which could negatively impact your CIBIL score.
Length of credit history: The age of your credit accounts is an important factor in determining your credit score. Closing old credit accounts can shorten your average account age, which may slightly lower your score, especially if you don't have many other accounts with a long credit history.
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Credit mix: Closing an old credit account could also affect your credit mix, especially if it's your only account of a certain type (e.g., your only credit card). Having a diverse mix of credit types can positively impact your credit score, so closing an old account might reduce that diversity.
Payment history: Closing old credit accounts won't directly impact your payment history, which is a significant factor in your CIBIL score. However, if you have any outstanding balances on the account you're closing, it's crucial to pay them off to maintain a positive payment history.
Closing old credit accounts can potentially impact your CIBIL score, particularly if it affects your credit utilisation ratio, credit mix, or average account age. It's essential to consider these factors before closing any
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