Keep first credit card to boost CIBIL

• Keep your first credit card open to build a long credit history
• Closing the card reduces your total limit and raises credit usage
• Use small recurring payments to maintain activity and a high score

Starting your first job is thrilling, and so is getting your first credit card. But amidst the excitement, it's easy to overlook how this small piece of plastic can shape your financial future. A common mistake is closing it once you get a better one.

Your Financial Report Card: The CIBIL Score

Before diving into credit card strategy, it's crucial to understand the CIBIL score. Think of it as a financial report card. It's a three-digit number, ranging from 300 to 900, that summarises your credit history. Lenders like banks and other financial institutions use this score to judge your creditworthiness. A higher score signals that you are a responsible borrower, which can lead to easier approvals for loans (like for a car or home) and better credit cards in the future, often with lower interest rates. For a fresher with little to no credit history, building a good score from day one is a massive advantage.

The Power of a Long Credit History

One of the key factors in calculating your CIBIL score is the length of your credit history. This doesn't just mean how long you've been using credit, but also the average age of all your credit accounts. A long credit history demonstrates experience and stability. It shows lenders that you can manage credit responsibly over a significant period. Your first credit card is your oldest credit account. By keeping it open and active, you are automatically lengthening your credit history, which positively influences your score. Closing it, especially if it's your only card, can shorten your credit history's average age, potentially lowering your score.

The Hidden Trap: Credit Utilisation Ratio

Another critical metric is your Credit Utilisation Ratio (CUR). This is the percentage of your total available credit that you are currently using. For example, if you have one credit card with a limit of ₹1 lakh and you've spent ₹20,000, your CUR is 20%. Lenders generally prefer a CUR below 30%. A high ratio suggests you are overly dependent on credit, which can be seen as a red flag. When you close your first credit card, you lose its credit limit. This reduces your total available credit. Even if your spending remains the same on other cards, your CUR will instantly increase, which can negatively impact your CIBIL score. Keeping that first card open, even if you don't use it often, keeps your total credit limit higher and your utilisation ratio lower.

Smart Strategies for Your First Card

So, what's the best way to manage that first credit card? You don't need to use it for all your major purchases. The key is to keep it active. If an account remains inactive for too long, the bank might close it automatically, which has the same negative effect as you closing it yourself. A simple strategy is to put a small, recurring payment on it, like a streaming service subscription or a mobile phone bill. Then, set up an automatic payment to clear the full balance each month. This demonstrates consistent, responsible usage without any effort. If the card has an annual fee, it's worth calling the bank. Sometimes they are willing to downgrade you to a lifetime-free version of the card, allowing you to keep the account open and preserve your credit history without the cost.