Can Multiple Credit Cards Impact Your Credit Score?

Today, the average Indian owns 3-4 credit cards. However, does holding multiple credit cards impact your credit score? Here is what you require to know –

There is zero hard and fast rule when it is to how many credit cards you must own. It is all dependent on the manner you manage your credit cards. Here are a few of the crucial consideration points linked with multiple credit cards that you must factor in. 

Multiple due dates – 

Multiple credit cards offer high convenience, but they can even make you miss out on your due date. So, multiple credit cards may make you miss or delay your repayments owing to the multiple due dates, which may negatively impact your credit score. For instance, suppose you have 2 credit cards – IDFC millennia credit card and IDFC credit card Classic, with due dates of the 5th and 25th, respectively of every month. As a customer of these two credit cards, it is very likely for you to miss out on your card’s due date as they are on varying dates. Here’s where you can opt for a standing instruction option to automate your due date payments.

Alternatively, you might even check with your card issuers about making changes to your due dates. Few credit card issuers may permit you as a customer to do so and by bring all your due dates to a preferred date, would save time, effort, and confusion. 

More credit card limit – 

The more the number of credit cards you hold, the higher would be your overall credit card limit. Having a surplus amount may be tempting, however noting to track down your expenditures to forgo splurging on unnecessary items and just spend what you can repay is the best way to move forward and to prove yourself as an individual with good credit behaviour. Also, you must make sure to stay within 30 to 50 per cent or even less of your overall credit card limit to avoid any negative impact on your credit history and score. 

Submitting a lot of credit card inquiries – 

Before you place an application for any new credit card, it is necessary to understand how this procedure works and the damage that may happen to your score. Lenders conduct hard inquiries to fetch your report when you fill out an application for a credit card or any loan. This is addressed as a hard inquiry as unlike soft inquiries, the direct inquiry raised by the creditor or issuer shows up on your credit report. So, if you place an application for numerous credit cards in a very short time period or if there raise multiple inquiries one after another, then these may result in a negative impact on your credit score. Thus, it is crucial for you to explore all the credit card-linked options to make a wise choice before you place the final application for any credit option. 

Also Check: IDFC Credit Card

Closing your previous credit cards – 

Your credit card account length is a very crucial component of your score. So, do not close your previous credit cards when you apply and avail a new one. Doing so may negatively affect your credit score. In place, you must continue making small spends via older cards as they will form a strong and sound history as well as ameliorate your credit score. 

So, what is the exact number of credit cards you must own?

Your credit score would remain good with 1-2 credit cards as it would be with 4-5 credit cards as long as you repay your credit card dues in full and on time, keep a low credit utilization ratio, avoid multiple credit enquiries, ensure to maintain a balanced mix of credit, etc. However, if you like the choice of holding a greater number of options, then you must ensure to go for the same. 

How does holding multiple credit cards impact your credit score?

So, from the above, now it must be clear to you that the number of credit cards you hold does not matter much. What matters much is how you use your credit card. It does not matter whether you have one or thirteen credit cards, your score may witness a drop if you do not follow healthy credit habits i.e., timely repay your credit card dues and perform other crucial activities. 

In contrast, if you continue to use your cards periodically and even pay your credit card dues on time and in totality per month, then holding more cards can make your score rise. This is basically because more cards infer you would hold a higher credit card limit. Experts tend to recommend you use just a small amount of your available credit card limit every month, most preferably thirty per cent or below to show responsible and sound credit management and behaviour. This indirectly increases your credit score. 

So, can owning a number of credit cards improve your score?

Owning multiple cards can endow you with a higher overall credit card limit as every credit card that you hold comes with its own credit card limit. Now, whether owning multiple cards will enhance your score or not thoroughly is based on how much you spend through your cards and how you tend to repay the same. If you hold a CUR (credit utilisation ratio) of below 30 per cent of your total available credit card limit and you tend to always repay your credit card dues on time and in full, it can assist you to increase your score. 

You must remember that late payments tend to remain on your report for more than 5-7 years and negatively impact your score for a long time period. On the contrary, a positive payment history remains on your report for over 10 years, in fact, even after you close your credit account. Thus, making all your credit card repayments on time can assist you to enhance your score and history.

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