Credit Cards are great financial tools providing security and convenience to cardholders. Credit cards come in very handy when an individual is out of cash or does not want to carry cash along when going out for some shopping. They can prove to be very helpful when you have to purchase high-value products as they allow you to purchase the product and pay for it later either in full or in installments. Also, they are quite accommodating while you are traveling as you do not have to worry about loss or theft of cash. And in unfortunate circumstances, where your credit card might get stolen, you can avail the benefit of zero lost card liability wherein you will not be responsible for any unwanted transaction taking place through your credit card. Because credit cards provide various benefits, we tend to have more and more credit cards for our convenience. But to have credit cards, an individual needs to have a great credit score. But the question that arises is does owning multiple credit cards affect your credit score?
Having a credit card is one of the easiest ways for an individual to start building a credit score. Once you have built a good credit score, you start getting eligible for better credit cards that offer better rewards and various value-added services to an individual. Getting attracted by all such features, an individual starts applying for multiple credit cards but lesser does he knows that owning multiple credit cards might have an impact on their credit scores. Having multiple active accounts can be quite challenging to control your spending pattern and have track of all the due dates of your multiple credit cards. Let us now understand in what ways can a credit score be affected.
How can multiple credit cards affect your credit score
Access to more credit
With added credit cards in your pocket, you have the access to more credit. This is because, with every new credit card that you will get, you will have an additional credit limit. Now, this can affect your credit score both in positive and negative ways. If an individual overuses the available credit limit, the Credit utilization ratio will increase and hence will impact their credit score in a negative way. But on the other hand, the extra credit limit can be a great way of improving your credit score only if you continue to spend in the same pattern in which you used to spend earlier.
Multiple due dates
The repayment pattern is one of the most important aspects of determining an individual’s credit score. Any delay in the repayment of credit card bills would lead to a decline in credit scores. When an individual has more than one credit card, it becomes a little difficult to manage the due dates of all the credit cards. So, to maintain the credit score, either the cardholder should take care of all the due dates or set an auto-payment option at least for the minimum due amount on all the credit cards or get ready to face a decline in your credit score if you make any default while repaying the your credit card bill.
Increase in the number of credit inquiries
When you place an application for a new credit card, the card issuer will perform a hard inquiry on your credit history, which will hence be reflected in your credit report. This inquiry will lower your credit score irrespective of the fact that you get approved or denied of the credit card application. Though this may not have an impact for a long time on your credit report but will have it significant short-term impact.
Having credit cards and maintaining the ones that you have is a good thing. You should go for multiple credit cards only if you will be able to maintain them. But if you become lenient towards handling these credit cards, they can have a bad impact on your credit score. Conditions like overutilization of credit ratio, delayed payment of credit card bills, hard inquiries, etc can lead to a loss in your credit score. But if used in a wise way, they can also help you in improving your credit score. It is not always that numerous credit cards will leave a negative impact on your credit score. You have to be very well planned and proper management is required to own multiple credit cards.