Having several cards can either help or hurt your credit score depending on how well you manage them. If you have a lot of high interest credit cards with substantial balances and become overwhelmed with the debt payoff process, you may want to consider debt consolidation.
Continue reading to learn about how multiple credit cards can affect your credit score.
Do Multiple Credit Cards Impact Your Credit Score?
How you use your credit cards is far more important than the number of cards you have. It doesn’t matter if you have two cards or 20 cards. If you fail to make your minimum payments on time, your credit score will take a hit. On the other hand, if you’re a responsible borrower and pay off your balances right away, you may be able to boost your credit score even if you have multiple credit cards.
Here’s why: More cards mean you have a higher available credit limit. If you only use about 30% or less of the credit available to you, it may help your credit score. But it’s your job to keep tabs on your spending. If you do decide to have several credit cards, you might want to create a monthly budget, so you don’t go overboard. Another option is to allocate specific credit cards for certain purchases. For example, you might use one credit card on groceries and another on travel.
Is There an Ideal Number of Credit Cards to Have?
There is no hard and fast rule that states how many credit card accounts you should have open at any given time. While many people have 3 or 4 credit cards, this may be too much or little for you. It all depends on your unique situation and the nature of the cards. Do your best to only apply for credit cards you know you’ll use. If a card comes with an annual fee, do some math to make sure the benefits you may be getting, such as a reward program or cash back feature outweigh the fee in the long run.
How Credit Scores Work
A credit score is a three-digit number that helps lenders see how responsible you are when you borrow money and predict how responsible you will be. If you have a high credit score, lenders may assume you’re likely to make timely payments. As a result, they may be willing to extend you offers with lower rates and more favorable terms. A lower credit score can make it more difficult to get the credit card and personal loan deals you’d like.
The good news is some lenders and creditors consider other factors other than an applicant’s credit score, such as income, collateral, and employment.
Ways to Improve Your Credit Score
While multiple credit cards could help your credit score, as long as you use them responsibly, there are other ways to boost your score, including:
- Pay All Bills on Time: Make sure you pay your mortgage, rent, personal loans, student loans, and any other bills you have on time, every time. Even one missed or late payment can wreak havoc on your credit score.
- Check Your Credit Reports: Visit AnnualCreditReport.com to request free copies of your credit reports from the three major credit bureaus. You’re entitled to one free credit report a year from each credit bureau, but it may be best to space out your requests through the year instead of getting them all at once. Review them carefully and dispute any errors or inaccuracies you find with the appropriate bureau.
- Keep Your Credit Utilization Ratio Low: Credit utilization refers to how much credit you’re using versus how much credit is available to you. Most experts recommend using no more than 30% of your available credit. If your credit utilization is high you can either pay down your balances or request a credit limit increase if you feel like you can comfortably manage an increased credit limit.
Bottom Line
Multiple credit cards could improve your credit score. If you make your payments on time plus leverage the rewards and benefits they offer, credit cards can be powerful financial tools.
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