Credit cards are better financial tools of convenience & security.
They come in handy when you either do not have any cash on hand or do not want to carry cash when making purchases. They may be quite useful when making huge purchases like a new tv or a major appliance.
They are useful while you’re traveling and can provide you with travel-related protections such as fraud coverage, lost card replacement, and auto rental insurance, etc.
But can you have several credit cards?
Having too much plastic under your name can harm your credit score.
This instantly begs the question of how many credit cards are too many and how opening multiple credit cards at once can affect your business credit scores?
Well, to understand this, you must know, how the credit score is determined.
How Your Credit Score Is Determined?
Firstly, it is essential to understand how your credit score is calculated. This might help you determine whether you carry too several credit cards or the some that you’ve are enough.
Here is a quick review of the key components of your credit score VS the amount of plastic you carry.
Payment History: This’s the big factor and counts for 35 percent of your credit score. Though this takes all your monthly payments from all your debt into account, your credit card payments are the big variable. Credit card companies are the least forgiving when payments are late and are quick to report to credit bureaus if they’re tardy.
Debt-to-Credit Ratio: referred to as credit use, this ratio measures the outstanding debt on your great credit cards in relation to your available credit. How close you’re to the credit limits on all your cards.
Your credit use factors into 30 percent of your credit score. The ratio hurts your score if it exceeds 30 percent.
Length of Credit History: This’s where people with multiple credit cards may get into trouble. creating a responsible history of on-time payments can improve your score with time. People with the best credit scores have an average age of 11 years for all of their cards. This contributes to 15 percent of your overall score.
New Credit: Whenever you add a new credit account, it may cause your credit score to drop some points. First when the creditor makes an inquiry on your credit report, then when the account is opened.
New credit will be 10% of your score.
Type of Credit: The kind of credit you’ve counted for 10 percent of your score. Credit bureaus like to see how you manage debt across different sorts of credit accounts. Your credit portfolio ideally should consist of a mix of credit cards, retail accounts, auto loans, installment loans, and a mortgage.
Having Multiple Credit Cards
There’re many different factors that can help you determine that many credit cards are right for you. Some people feel that a small number of cards 1-3 is quite enough, while others end up opening multiple cards over time by responding to new offer incentives that come their way in the mail and online. But in reality, the great way you manage them and the conditions under which you obtain them that matters more than how several credit cards you carry.
It can make sense to have an initial card to use for most spending and maybe 1-2 as a backup or for specialized purposes (such as using for a specific spending category that’s rewarded with bonus points and cashback with a certain card). It is important to keep in mind that having too several open credit lines relative to your income, even if they are not used, can make you look potentially risky to lenders and degrade your credit score.
Key Takeaways
Having too several outstanding credit lines, even if not used, may hurt credit scores by making you look more potentially risky to lenders.
Having multiple active accounts can make it further challenging to control spending and keep track of payment due dates.
Credit use beyond 30 percent of cards’ credit lines and late payments can essentially lower credit scores.
Closing old accounts can decrease your average age of credit and harm your score.
You can boost your score in a few cases by opening new credit cards if the new credit lines lower your overall use ratio.
Having multiple credit cards may be difficult to manage more than one due date
You will have access to more credit
The average length of your credit history will raise
It’ll raise the number of credit inquiries.
When you submit a new credit card app, lenders normally perform a hard inquiry into your credit history, which will seem on your credit report. These inquiries have the potential to low your credit score, regardless if you are approved or denied, and they remain on your credit report for 2 years.
If you want help with managing multiple credit cards, here are tips:
Utilize budgeting software that lets you see transactions and balances in one place.
Keep a list of monthly due dates and when annual fees are due.
Consider waiting unless you have a better credit history before you apply for multiple cards.
Be honest with yourself around your capacity for card management.
Get rewards credit cards that can align better with the lifestyle you have, whether you spending on travel, dining, groceries, and gas. so, you can maximize the value.
Conclusion
Getting multiple credit cards would not hurt your credit score if you utilize them responsibly.
But the more cards you’ve to keep track of, the more probably you can be to forget about payment. So, there can be consequences if you’ve trouble staying organized and with overspending. As you consider whether it is the best idea for you, think about why you need to have multiple cards and what your plan is for managing them responsibly.
Because if you do it right, you can take benefit of all the benefits your cards have to offer with some drawbacks.
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