Using multiple credit cards? Here’s how it impacts your credit score

In today's unpredictable financial landscape, having multiple credit cards has become increasingly common. But the question remains: does having multiple credit cards raise or lower your credit score? Let's explore this question further by discussing the advantages and disadvantages, as well as the best ways to manage multiple cards.

Factors influencing credit score

Before you begin using any methods, it is important to know what impacts your credit score:

• Repayment history: The most critical aspect is paying your loans on time.
• Credit utilisation: The ratio of your current credit usage, to your available credit.
• Length of credit history: Old credit history is generally favourable.
• Credit mix: A good mix of secured and unsecured loans improves your credibility.
• New credit requests: Too many applications over a short period of time may harm your score.

Benefits of having multiple credit cards

• Credit utilisation: If you have several cards, your total credit limit increases. If you use your credit responsibly, your credit utilisation rate should remain low positively affecting credit score.
• Better reward management: Having a card for certain uses means you can utilise and maximise rewards for spending and that makes it easier to spend wisely.
• Credit mix: If you have cards in addition to a loan, your credit mix will be better. A credit mix benefits your credit score.

Potential drawbacks of multiple credit cards

1. Risk of missing payments: Missing just one payment can do serious damage to your credit score. Payment history is all-important; ultimately, one cannot risk consistency.
2. Over spending: It is handy when used prudently, but it may damage your finances and, ultimately, your credit score, credit card use can grow into debt.
3. Hard inquiries: If you apply for several all at once, there may be a small reduction in your score - it may depend on the lender as this may signal distress to them.
4. Credit age: If you're opening new credit cards, you're lowering the average age of your credit, this may cause a slight reduction in your credit score assuming you were closing or not using other credit available.

Smart strategies to manage credit cards

• Automate payments: To help ensure you don't miss a payment due date, set up standing payment instructions.
• Track your debt payments: Monitor every purchase you made with a card using applications or some other method.
• Limit new applications: Only apply for new credit cards when the situation requires.

In conclusion, having multiple credit cards can either improve your finances or deteriorate them depending on how you manage them. They can quickly become liabilities through poor behaviours, missed payments, or unnecessary credit inquiries.

Disclaimer: Mint has a tie-up with fin-techs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.