Why closing your old Bank account/Credit card is a bad option

Financial knowledge is the need of the hour for all. It’s our duty to be informed about current events in the market. As compared to the past decade, we’ve been pumping more money in the mutual fund market. People now understand the importance of SIP (Systematic Investment Plan) and its benefits after 3-5 years. Many want to invest in stock market for longer period and many want to invest in real estate. We now understand the importance of life and medical insurance.

Hence the average person today is informed, actively looks for more investment options and ways to strengthen their financial profile. We might consider closing our old accounts and credit cards that are not being used today. Let me tell you why that’s a bad choice.

Your credit score is calculated for a long time and takes time to improve or fall. This credit score includes history of all the loans you took using old accounts and credit cards. When you plan to close your old account or credit card, you need to understand that your credit score will reduce. Yes, when the account is closed, your credit history for that entire active period is wiped out. Hence if you had a good score, that will fall and you will have to begin building your score from scratch.

The same applies for your old credit card. If you close your old credit card because the new one has better benefits etc then the credit history attached to that card will be wiped out. Hence it’s very important to use and maintain your old accounts in case you plan to take a new loan/debt. In conclusion I’d like to tell you that it’s best to think wisely, pay your bills due, pay loan EMI’s without defaulting and that will help you maintain a strong financial profile.

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