Can unused credit cards impact your credit profile?

Credit cards have become an important part of our lives. With various options and lucrative offers available, it becomes so difficult to choose what fits best for our needs. From various offers on dining to broadways, air miles, reward points, shopping experiences and what not is offered in various types of credit cards. But, technically, when we opt for too many credit cards with an individual offer, it can be a possibility that we may forget some.

Let’s understand this with an example. Priya was a very passionate young achiever at a good position in an MNC. She has achieved a lot in that young age. Obviously, with that age and that position, she was on cloud nine! With that age, she was also attracted to those offers of the credit cards which the banks had offered her. Some credit card with air miles offer, some had dining offers, some gave her amazing reward points and what not! Now when she had more than five cards, at times it becomes difficult for her to manage. So, eventually, she picked two best of cards which could give her maximum benefit and rest she kept aside.

Now, she did not close those credit card accounts and thought that would work as she wasn’t using them. After a year or two, she wanted to buy a house and planned to apply for a loan. To her surprise, her loans were getting rejected as her CIBIL score was not up to the mark. The question may arise is, what is CIBIL score? And what is it’s an effect on loan sanction? A CIBIL score is a 3 digit number that ranged from 300-900 where 900 is highest and 300 is lowest. It is determined by five factors. Payment history, an amount owed, length of credit history, type of credits and new credits. Any loan or credit applied for is the major reason why and how the score is what it is. Higher the score, more are the chances of loan application getting approved. How is this score diversified? 750+ score is always considered a good score. Anything between 600-750 is average score and anything below that is not considered a good score or we can say a bad score.

Priya, when wasn’t using her cards, she forgot the fact that each credit card has yearly charges. When not paid, they can keep on getting added to your account, in turn, adding more amount to it as delayed payments and added interest charges. What she couldn’t figure out, and because of delayed payments of that or we can say missed payments this amount kept on increasing which decreased her score and getting the loan application rejected!

What did we get from this example? At times, when we decide to not use the credit card anymore, we must either close the account or if for length of the credit history if we want to keep that open, every six months, we must check are CIBIL score, and the report in order to get an idea if we are not missing on anything which is making outscore low! We should always remember that the score can take no time to go low, but will require more time to get it on track. You must be paying all the credit bills on time, you must not be missing on any EMIs that are scheduled, but an unused credit card’s yearly surcharges may just drag the score down.

Always remember, an open credit account will have its repercussions, so either one would close the account they aren’t using, or if it is kept open, the yearly fees or are other charges should be taken care of and paid. Especially the once of unused credit cards!

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