Does checking my own credit score affect it?

Checking your credit score on your own has no effect on your credit score as it does not get reported to credit bureaus. In fact, it is an encouraged financial habit as it helps you timely identify errors and fraudulent activities.

Can inactive credit card accounts help in improving your credit score?

Inactive credit card accounts can help in improving your credit score by increasing your total credit limit and the average age of your credit history. Thus, it is usually best to keep these accounts open and make occasional small purchases.

Is credit history more important than your income?

Your credit history proves your reliability, while your income proves your ability to repay the loan. So for lenders, their importance may vary on a case-to-case basis. For instance, in case of new to credit customers, your income will be more important due to insufficient credit history.

Does the Length of Your Credit History Affect Your Credit Score

The length of your credit history affects your credit score. Lenders usually look at the age of your oldest credit account, the age of the latest credit account and the average age of all your credit accounts to determine your credit behaviour and financial stability. Having a longer and consistently well-managed credit history gives lenders more confidence in your ability to manage debt.

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Why Check Credit Score on Paisabazaar ?

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What is Credit History?

Credit history is the record of how you have used and dealt with credit in the past. It usually includes the details of:

Your credit accounts, i.e., loans and credit cards you have taken till now
EMI and credit card payment history
Active and closed accounts
Outstanding debt
Credit limit utilisation
Loan and credit card applications

Credit card companies and banks share your credit information to all credit bureaus in India (TransUnion CIBIL, Equifax, Experian and CRIF High Mark). Credit bureaus use this information to generate your credit score. When evaluating a credit application, lenders too look at your credit history to assess your creditworthiness. Having a long and strong repayment track record:

improves your chances of getting approvals on loans/credit cards at better terms
helps you get loans at lower interest rates
makes you eligible for pre-approved offers

On the other hand, having a poor credit history may negatively affect your creditworthiness.

What Does the ‘Length of the Credit History’ Mean?

The 'length of the credit history' refers to how long you have been using credit. Credit score models usually consider this factor to understand how responsibly an individual handles its credit repayments. It is usually calculated on the basis of the:

age of your oldest credit account: This refers to the age of your oldest active credit account such as your first loan or your first credit card. A longer credit history may indicate greater experience in handling the credit responsibly.

average age of all your credit accounts: This is determined by dividing the total age of all your credit accounts by the total number of active credit accounts you currently have. Opening multiple new accounts within a short span may reduce the average age of your credit accounts.

For example:

Credit Account	Age
Credit Card	10 years
Personal Loan	4 years
Consumer Durable Loan	1 year

As per the above example, the average age of accounts would be 5 years.

age of the newest credit account: Recently opened credit cards or loans are also considered while evaluating your credit profile. Multiple new accounts in a short duration may indicate higher credit dependency.
duration of active credit usage: This reflects how consistently and actively you have used credit over time. Maintaining older accounts responsibly for a longer period may positively impact your credit profile.

How Does the Length of Credit History Affect Credit Score?

Having a longer credit history gives lenders more credit information to assess your credit repayment behaviour. Having a long and strong credit history has a positive impact on your credit score as it demonstrates:

your long experience in managing credit, which helps in building trust with lenders
consistent positive behavior and ability in making timely payments and managing credit payments responsibly

Having a very short credit history, on the other hand, increases your lender's credit risk due to insufficient credit information. Thus, loan applications of such applicants may be declined or approved at higher interest rates.

Also note that having a long credit history solely does not guarantee a high credit score. Payment history, credit utilisation ratio, credit enquiries and credit mix are other factors that make up your credit score.

Will Closing an Old Credit Card Affect Credit Score?

When it has the most impact on your credit score:

Closing an old credit card may temporarily reduce your credit score. It impacts your credit score in the following two ways:

Length of the credit history

When you close your credit card account, the average age of your credit account shortens, which may temporarily impact your credit score.

Credit utilisation ratio

Closing a credit card account also reduces the total available credit limit. If you carry dues on your other credit cards, closing a credit card would immediately increase your credit utilisation ratio, which further may reduce your credit score.

When it has minimal impact on your credit score

Closing a credit card won't hurt your credit score much if the card was new with a low credit limit. Moreover, closed credit accounts usually reflect on your credit report for up to 10 years, which implies that you won't lose the positive, on-time payment history associated with them right away.

When should you close an old credit card?

You should usually close an old credit card only if it charges an unaffordable annual fee that outweighs its benefits, if you are struggling with overspending or if you are trying to simplify your finances.

How to Build a Long and Strong Credit History

Building a long and strong credit history is a gradual process. To achieve it, follow these tips:

Try to keep your old credit card accounts active even if you are not actively using them.
Pay your EMIs and credit card bills by their due dates to build a positive credit history over time.
Avoid making frequent multiple new credit applications in a short span to avoid reducing your average age account.
Use your credit card responsibly to ensure you maintain a low credit utilisation ratio.
Monitor your credit report from all credit bureaus in India at regular intervals to timely identify and rectify any discrepancies or fraudulent activities that can reduce your credit score.

Common Mistakes to Avoid

The following common pitfalls can reduce your credit length and reduce your credit score:

Closing your oldest credit card - This can reduce the average age of your credit history, which further can affect your credit score.
Missing your credit payments - This can also hurt your credit score despite having a long credit history.
Repeatedly maxing out your credit cards - This increases your credit utilisation ratio, which can reduce your credit score.
Frequently making new credit applications - This will increase your credit enquiries and also your new credit accounts, which further will bring down the average age of your credit accounts.
Not availing loans or using your credit cards - Availing a new credit card alone won't build your credit history. To build your credit history, you will have to use it responsibly.

How to Check CIBIL Score for Free with Paisabazaar?

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Step 2: Provide your personal details

Step 3: Enter OTP to verify your mobile number

Step 4: Select the credit score purpose and credit score amount

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How to Check CIBIL Score for Free with Paisabazaar?

Step 1: Enter your mobile number in the application form

Step 2: Provide your personal details

Step 3: Enter OTP to verify your mobile number

Step 4: Select the credit score purpose and credit score amount

Apply Now

FAQs

Does closing old credit cards lower credit score?

Yes, closing your old credit card accounts can reduce your credit score as doing so will not only increase your credit utilisation ratio but also the length of your credit history.

How much does the length of credit history matter?

The impact of the length of your credit history on your credit score is moderate and temporary. A long and strong credit history shows your financial stability, reliability and long-term financial discipline to lenders.

What is considered a good credit history length?

A good credit history length is usually 7-10 years, though you can achieve a very good credit score with just 2 years of consistent and active credit use.

Can I get a loan with a short credit history?

Besides the length of your credit history, there are various other factors that lenders consider when reviewing a loan application. So, even if you have a short credit history but stable income and sufficient loan repayment capacity, you can get a loan.

How long does it take to build a good credit score?

Building a good credit score is a gradual process and takes time. Therefore, predicting the exact time to achieve the results is not possible and would require consistent responsible credit habits.

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