Length of credit history is an indicator of how long you have been using a credit product. The longer the credit history, the better it is for you. This is because for lenders, a long credit history shows your ability to manage credit for longer periods which also helps in maintaining a good credit score.
The credit score is a three digit number between 300 and 900 points, and a good credit score is 750 and above. It is a number which tells about the status of your financial health.
Holding onto old credit cards help because around 10-15 per cent of your credit score depends on the length of credit history you maintain along with other factors such as payment history (30-35 per cent), credit utilisation (20-25 per cent), and credit mix (15-20 per cent).
So, what happens when you decide to close your old credit card?
According to an expert, one should not be in a hurry to get rid of the oldest credit card just yet. “Holding a card with a higher vintage is beneficial as that adds to your credit history and definitely is good for score. So closing such a card may not be advisable. Having said that migration should not impact your credit score as this would not be counted as additional card in your wallet,” says Anurag Sinha, co-founder and CEO, OneScore and Onecard.
The reason for closure could be many ranging from no attractive offers, difficulty in managing too many cards to a change in management. For example, Axis Bank recently took over retail banking operations of Citibank in India. After the merger its customers will have to agree to Axis managing their business, their accounts, credit cards and other business, else the relationship will terminate and they can exit with their deposits.
It is important to maintain a good credit score as it is directly linked to the interest rate. If you have a good score, you can get the best interest rates for home loan, personal loans, among other things. But if your score is poor, you may not be able to get a loan despite meeting other eligibility criteria. It is not something one can build or improve in a few days, but takes several months. And therefore one of the measures to have a good credit score is by maintaining a long credit history.
Copyright©2022 Living Media India Limited. For reprint rights: Syndications Today