Length of credit history is an indicator of how long you have been using a credit product. The longer the credit history, the better for you. Indeed, for lenders, a long credit history shows your ability to manage credit for longer periods of time, which also helps maintain a good credit score.
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 that provides information on the state of your financial health.
Keeping old credit cards is useful because around 10-15% of your credit score depends on the length of your credit history as well as other factors such as payment history (30-35%), l use of credit (20-25%) and composition of credit (15-20%).
So what happens when you decide to close your old credit card?
According to an expert, you shouldn’t be in a hurry to get rid of the oldest credit card just yet. “Holding a card with a higher vintage is beneficial as it adds to your credit history and is certainly good for the score. Closing such a card may therefore not be advisable. That said, migration should not have affect your credit score as it would not be considered an extra card in your wallet,” says Anurag Sinha, Co-Founder and CEO of OneScore and Onecard.
The reasons for the closure can be many, ranging from a lack of attractive offers, difficulty managing too many cards, or a change in management. For example, Axis Bank recently took over Citibank’s retail banking operations in India. After the merger, its customers will have to accept that Axis manages their business, accounts, credit cards and other activities, otherwise the relationship will end and they can walk out with their deposits.
It is important to maintain a good credit rating because it is directly linked to the interest rate. If you have a good score, you can get the best interest rates for a home loan, personal loan, and more. But if your score is low, you may not be able to get a loan despite meeting other eligibility criteria. It’s not something you can build or improve in a few days, but it takes several months. And so one of the measures to have a good credit rating is to maintain a long credit history.
Also read: Here’s how to check your credit score if you’ve been the victim of identity theft
Also read: Here’s everything you need to know about credit scores