Does cancelling a credit card application affect your score?
I used to think closing a credit card was no big deal until I cancelled one of my oldest cards and noticed the hit on my credit score. The effect depends on how well you handle the rest of your credit cards or loans.
When you cancel a card, your total credit limit shrinks. If your spending stays the same, your utilisation ratio increases, and that can drag your score down if it exceeds 30%.
Additionally, closing your oldest card can shorten your credit history, and lenders prefer to see a long track record of responsible borrowing. Now, before I even think about cancelling a card, I consider the following things:
- If there is no annual fee, I usually just keep it open, even if I barely use it.
- I never touch my oldest card since it strengthens my credit history.
- I check my utilisation ratio to make sure closing a card will not make me look riskier.
- And if I do cancel, I always clear all dues and redeem any reward points first.
So yes, cancelling a card can hurt your score, but not always. If you keep your utilisation low, pay on time, and have other accounts running, the impact is usually small.