A financial behavior analysis is very important to determine where having multiple credit cards will affect credit score. The usage of credit cards is the main criteria. You should have a habit of using credit cards sensibly by maintaining a low credit balance and making the payment on time.
Remember to not apply for many credit cards because this may have an impact on your credit score. Applying for many credit cards at one time will have an impact on your credit score. There will be hard inquiries on your account and you will be subject to a negative score which will have a long term effect on your account. If you are managing your cards in a proper way you can increase your credit score.
Does multiple credit cards impact credit score?
It will not have a negative impact on your credit score whether you have 1 credit card or 15 credit cards. All it matters is how you utilize your credit card. If you are using the credit cards regularly then pay the card payments full at the payment cycle.
Do not think that by making a minimum payment you will not have any effect on your debt. Minimum payment will increase the credit card debt. There is a huge interest levied for making the minimum payment and you will be falling into a vicious cycle of payment, if you do not make full payments as soon as possible.
Having more credit cards means you will have a higher credit limit but the truth is you cannot use the complete credit card limit. If you are using the complete credit card limit then you will have an adverse effect on your credit score. It is advised to only use 30 percent of your credit limit on each card that you hold. It is the most responsible way to make the card usage.
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Will having multiple credit cards boost credit score?
Yes, having multiple credit cards and making their payment on time will boost your credit score. But the spending limit should be within the 30% limit of your credit card. If a borrower is having 10 credit cards then using the 30% credit card limit on all the cards will be a good idea and making repayments on time will provide a good credit score.
On the other hand if you miss to make the payments then it will have a negative impact so huge that it will last for nearly 5 to 7 years. Positive credit card payments will have a good impact on credit score for more than 10 years. Not only having multiple credit cards but also making the payments on time will have a good effect on the credit score.
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Multiple credit cards effect on credit score
Credit cards are a good source of credit and should be used with utmost diligence.
- Average credit history is key for a good credit score.
- When you apply for credit, agents will do hard inquiry and it will have an impact reducing your credit score.
- You will fall in the trap of multiple spending as you will spend more than what you need when you are having multiple credit cards
- The risk of missed payments or delayed payments will hit your credit score
- When you close your credit card it will reduce your credit limit and it will have a negative impact on your credit score.
How many credit cards should you have?
There is no limit on credit cards and there is no universal formula for telling how many credit cards you should be having. It all depends on the card usage. By having one credit card and mismanagement of it will affect your credit score, by having 10 credit cards you manage them well will have a good impact on your credit score. The number of credit cards is nowhere the matter.
All you need to do is consider the advantages and disadvantages of credit cards which you are applying for and whether it suits your lifestyle. Consider annual fees, credit cards limit and do low utilisation of credit and these will have a strong impact on your credit score.
Take away
Check your credit score and credit report before applying for a new loan. Taking this step allows you to confirm that the information lenders will see is accurate and that you likely meet their eligibility criteria. This proactive approach can help you avoid potential disappointments and any negative impacts on your credit history that might arise from applying for credit you are unlikely to receive.
To make it easier for you, you can typically access your credit report and often your credit score from reliable sources. It’s a good habit to review these periodically to stay on top of your credit health.
About the author
Vinay Kumar Goguru is a finance professional with more than 8 years of diverse experience as a researcher, instructor and Industry work experience with both public and private entities. Prior to MyMoneySouq, he spent 6 years in Berkadia, It's a commercial mortgage banking company. He has a "Doctoral Degree in Commerce" and two master's degrees with a specialization in Finance, one as Master of Commerce and other as Master of Business Administration. He has written several articles on personal finance, published by different International journals. He loves traveling, reading and writing is his passion. He has a dream of writing a book on his favorite finance topics.
