Credit cards are very safe and handy instruments for making cashless purchases. That does not imply you should accept all the cards you are qualified for. Depending on how you use your cards, having many cards might either raise or lower your credit score. The goal, regardless of how many cards you have, is to keep your balance low and consistent with your monthly payments.
Continue reading to find out if having too many credit cards can harm your credit score and how to use credit cards wisely to protect your credit rating.
Credit scores are three-digit numbers calculated by credit bureaus depending on a few key factors. These includes:
- Repayment history
- Ratio of credit utilisation
- Credit length
- diversity of credit portfolio
- Debt-to-income ratio
How Many Credit Cards Can Improve Your Credit Score?
Each credit card comes with a credit limit, so having many cards might provide you with a bigger credit limit. Having a large credit limit allows you to keep a low credit utilisation ratio, which can eventually help you improve your credit score. Paying all of your credit card bills on time is a fantastic way to improve your credit.
How Many Credit Cards Can Hurt Your Credit Score?
While having too many credit cards may help you enhance your credit score, utilising them correctly necessitates caution and self-control. Using numerous credit cards at the same time is generally not a good idea. Here are some of the reasons:
More Credit Limit: Having numerous cards allows you to access a bigger credit limit, which may encourage you to spend more. Carrying the debt forward might harm your credit score because you would pay it off each month.
Complex Management: Having numerous credit cards involves remembering various due dates. It may become difficult to keep track of them, and you risk missing or postponing payments. If you miss a payment, whether intentionally or inadvertently, it can lower your credit score and force you to pay steep interest rates and late-payment penalties.
Multiple hard inquiries: When you apply for a new credit card, the bank or card issuer conducts a hard inquiry on your credit report.These inquiries cause momentary decreases in your credit score, and too many of them can have a long-term negative impact on it.
Reduced Credit Age: If you have a lengthy history of appropriate credit management, credit agencies will award you a higher credit score. Each new credit card reduces the average age of your credit history and lowers your credit score. Because a new card does not allow you to demonstrate positive credit behaviour, it may harm your credit rating.
Unused Cards: If you have numerous cards, some may provide you with greater benefits than others. You may eventually decide to give up the unused cards in your drawer. When you do this, you restrict your credit limit and eventually harm your credit score.
Tips to Maintain a High Credit Score While Using Multiple Credit Cards
Avoid Applying for Numerous Cards at the Same Time: Because each application might result in a hard inquiry on your credit report, lowering your credit score, you should avoid applying for multiple cards at the same time. Apply for one card, wait for your credit score to improve, and then apply for another.
Maintain Consistency in Credit Card Bill Payments: Your payment history accounts for a significant portion of your credit score. To attain a near-perfect credit score, you must pay your credit card bills in full each month. Missing a bill payment, even by accident, can result in a worse credit score and steep late-payment penalties.
Activate e-Mandate: Enabling e-Mandate might assist you in paying your payments on time. When you do this, your monthly bill payment is automatically taken from your bank account. This eliminates the need to recall due dates and pay various payments each month.
Maintain a Low Credit Utilization Ratio: The smaller your credit utilisation ratio, the higher your credit score might be. As a result, while you have the credit limit on all of your credit cards, you must limit your spending to using the bare minimum of the available amount.
It’s not about how many credit cards you have but about how you use them appropriately. The ideal number of cards to utilise is 3–4. Only apply for a credit card that offers attractive rewards that match your needs and lifestyle. The simplest way to maintain a high credit score is to keep your credit utilisation ratio low and to pay your credit card bills on time.