Your three-digit credit score is a measure of your creditworthiness. When you apply for a loan or credit with a bank or non-banking financial company (NBFC), the first thing they do is check your credit score. A good credit score or credit report can lead to the approval of your loan application. On the other hand, a bad credit score can lead to its rejection. Show
Apart from this, there are several other reasons to maintain a good credit score: · It makes you eligible for loans
· You get loans at lower interest rates
· Your loans are approved faster
· It adds value to your visa application
How credit cards help to improve your credit score
Furthermore, you can enjoy up to 50 days of interest-free credit on your credit card spending. This means you can use your credit card now and repay the amount in a maximum of 50 days without incurring any interest charges. Using your credit card, you can also earn reward points, cashback, and discount vouchers. If these benefits weren’t enough, your credit card could also help you improve your credit score. Using your credit card wisely and repaying your credit card bills on time can boost your credit score significantly. The primary factors that affect your credit score include your payment history, number of active loan accounts, credit mix, and credit utilisation ratio. How having multiple credit cards impacts your credit score
Well, the short answer is that having multiple credit cards can act as a two-sided sword. If you use your cards properly, they can boost your credit score significantly. On the other hand, if you are careless, it can have a negative impact on your credit score. Let’s look at how multiple credit cards affect your credit score and how you can use them judiciously to maintain a good credit score. You become eligible for a larger credit limit
For example, if you have one credit card with a credit limit of Rs 50,000, your total credit limit is Rs 50,000. But if you have three credit cards with that same credit limit, your total credit limit goes up to Rs 1.5 lakh. And when you have a large credit limit, your credit utilisation ratio automatically stays low, thereby improving your credit score. You get the chance to create a clean credit history
However, having multiple credit cards also increases your financial responsibility. It can become challenging to manage on-time payments for all of them. And if you miss the payment deadline on any of your credit cards, your credit score can decrease noticeably. The average duration of your credit history reduces
Please note that there’s nothing wrong with applying for a new credit card. It can actually be beneficial to keep multiple credit cards. However, it is advisable not to have more than three or four credit cards. Also, you should not close any of your old credit card accounts, as doing this can cause a reduction in your average credit history. You start to get more credit inquiries
Therefore, you should refrain from applying for new credit cards frequently. Ideally, apply for a new credit card at least six months after taking the previous credit card. This will ensure that even if a soft inquiry lowers your credit score, it can bounce back. Another thing you can do is to apply only for a pre-approved credit card, as lenders make no credit inquiries for these cards. For example, you can get a pre-approved IDFC FIRST Bank credit card by simply applying for it online. To check your pre-approved credit card offers, click here. Conclusion As you just saw, having multiple credit cards can boost your credit score. However, it is crucial to manage all your cards wisely and keep track of their usage. If you fail to use them properly, your credit score can take a hit. Also, remember to be watchful before applying for a new credit card because this can cause your credit score to drop. Disclaimer The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision. Does multiple credit cards impact credit score?Key Takeaways. Having too many outstanding credit lines, even if not used, can hurt credit scores by making you look more potentially risky to lenders. You can boost your score in some cases by opening new credit cards if the new credit lines lower your overall utilization ratio.
Does your credit score go up if you have more cards?Whether you own two credit cards or 12, your score will suffer if you accrue debt you can't pay. On the other hand, if you use your cards to pay for purchases that you then pay off right away, having more credit cards can result in a credit score increase.
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