The Credit Score Mistake Almost Everyone Makes

Closing an old credit card might feel like the financially responsible thing to do.

But there is an important question people often miss:

What happens to the rest of your credit profile when that card disappears?

Why closing an old card can matter

Your credit profile is influenced by several factors, and one of the important ones is credit utilisation.

Imagine you have:

• Card A — ₹1,00,000 limit
• Card B — ₹1,00,000 limit

Your total available credit is ₹2,00,000.

If you have ₹20,000 of outstanding balances, your utilisation is:

₹20,000 ÷ ₹2,00,000 = 10%

Now suppose you close Card B.

Your available credit becomes ₹1,00,000.

The same ₹20,000 balance now represents:

₹20,000 ÷ ₹1,00,000 = 20%

You didn’t spend another rupee.

But the ratio changed.

Does closing a credit card automatically hurt your score?

No.

That’s an important distinction.

Closing an old card is not automatically a bad decision. The impact depends on the overall credit profile, utilisation, age and other factors.

The point is to understand the consequences before you close the account.

What should you consider?

Before closing an old credit card, look at:

• Its annual fee
• Your total available credit
• Your current utilisation
• How long you’ve held the account
• Whether the card provides useful benefits
• Whether you have other active credit accounts

The better question

Instead of asking:

“Do I use this card?”

also ask:

“What changes in my overall credit profile if I close it?”

That second question is where many people miss the bigger picture.

Watch the full breakdown

The video goes deeper into the mechanics and the other factors that can influence your credit profile.

Final thought

Financial decisions often look simple when you consider only one variable.

The better approach is to understand the trade-offs before acting.