How to Cancel Your Credit Card Without Hurting Your Credit Score

By Stahlman 3 months ago
How to Cancel Your Credit Card Without Hurting Your Credit Score

Cancelling a credit card might seem straightforward, but doing it incorrectly can negatively impact your credit score. Credit cards play a very important role in building and maintaining your CIBIL score, which lenders use to evaluate your creditworthiness. Whether you want to cancel a card due to high fees, lack of use, or better alternatives, it is important to follow the right steps to avoid any unfavourable effects on your financial profile. Here’s a guide on how to cancel credit cards responsibly.

Understand the Impact on Your Credit Score

Cancelling a credit card can affect your credit score in two key ways:

  1. Credit Utilisation Ratio: This is the percentage of your total available credit that you’re using. Cancelling a card reduces your available credit, potentially increasing your utilisation ratio, which can lower your score.
  2. Credit History Length: Your credit score influences the average age of your credit accounts. Closing an older card, especially if it’s your longest-standing account, could shorten your credit history.

Steps to Cancel a Credit Card Without Hurting Your Credit Score

  1. Clear Outstanding Dues: Ensure all outstanding balances are cleared before cancelling a card. Carrying unpaid dues can harm your CIBIL score and may result in penalties. Verify the final statement to confirm that no charges remain.
  1. Use Rewards Points: Check your accumulated rewards points or cashback benefits. Most issuers don’t allow you to redeem these after cancellation. Redeem all benefits before proceeding with the closure.
  1. Evaluate the Card’s Impact on Your Credit Profile: If the card you want to cancel has a high credit limit, consider whether its closure will significantly increase your credit utilisation ratio. If it does, retaining the card or reducing usage might be wiser than closing it.
  1. Contact the Card Issuer: Inform your credit card issuer of your decision to cancel the card. Most issuers require a formal request, which can be made via phone, email, or in writing. For your records, we request a written confirmation of the cancellation.
  1. Check for Recurring Payments: Identify and update any recurring payments linked to the card. Failing to do so could result in missed payments and penalties, harming your credit score.
  1. Monitor Your Credit Report: After cancelling the card, review your credit report to confirm the account is marked as “closed” and that no errors have been made. Regular monitoring also helps maintain a good score when applying for products like an Aditya Birla personal loan.

Why Responsible Credit Card Management Matters

Properly managing your credit cards is vital for a healthy financial profile. A good CIBIL score helps you qualify for loans and allows you to secure better interest rates on products like the Aditya Birla personal loan. Credit card cancellation should be done strategically to avoid unnecessary dips in your score.

Cancelling a credit card without harming your credit score is vital for maintaining financial health. Follow responsible steps for a smooth closure and consult professionals if needed. Consider Aditya Birla’s personal loans for flexible financial solutions to support your stability.