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does having multiple credit cards affect your credit score?

does having multiple credit cards affect your credit score?

finance
December 1, 2021
5 min read
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the effects of owning multiple credit cards on your credit report and credit score largely depend on your financial behavior, i.e. how sensible you use your credit cards. it does not matter how many credit cards you have, you have to maintain your credit balances low and always pay your credit card bill on time.

if you already have multiple credit cards, it's unlikely to have a negative impact on your credit score, however, you should never apply for too many new credit cards at one time. applying for too many new credit cards at the same time will result in too many hard inquiries which can negatively impact your credit score in the short term. however, if you manage your cards properly, with more credit cards you can increase your credit limit and thus it can help you improve your credit scores.

keep reading below to know how the number of credit cards you own can impact your credit score, and how to decide how many credit cards you should have.

how does having multiple credit cards affect your credit score?

more than the number of credit cards you have, how you use your credit card affects your credit score. it does not matter whether you have two or 12 credit cards, your credit score will drop if you do not pay your credit card bills on time.

on the other hand, if you use your credit cards regularly and also pay the credit cards bills on time and in full every month, then having more credit cards can result in a credit score increase. that's primarily because more credit cards mean you would have a higher credit limit. experts recommend using only a small portion of your available credit limit each month, most preferably 30% or less, to show responsible credit management and improve your credit score.

can owning multiple credit cards boost your credit score?

owning multiple credit cards can give you a larger overall credit limit as each credit card you hold comes with its own credit limit. now, whether owning multiple credit cards will boost your credit score or not depends upon how much you spend on your credit cards and how you pay them back. if you have a credit utilization ratio of less than 30% of your available credit limit and you always pay your credit card bills in full before the due date, it can help you boost your credit score. 

you should note that late payments stay on your credit report for over five to seven years and hurt your credit score for a long time. on the other hand, the positive payment history stays on your credit report for more than 10 years, in fact, even after an account is closed. therefore, making all credit card payments on time can help you boost your credit score.

can multiple credit cards hurt your credit score?

more than the number of cards, how you apply for the new credit cards and how you manage them matters when it comes to your credit score. for example, if you have applied for too many credit cards at the same time, it will create multiple hard inquiries on your credit report in a short time, which in turn can hurt your credit score. here's how applying for several credit cards at the same time can hurt your credit score:

  • newer credits can lower the average age of your credit history. credit bureaus give higher credit scores to individuals with longer periods of credit history. 
  • with newer credit accounts, you won't have enough credit history to show your financial behavior, and as a result, your credit score can suffer.
  • when you apply for new credit, the lender will do a hard inquiry to evaluate your credit report which can cause a temporary drop in your credit score. though you can rebuild your credit score with time.
  • having more credit cards means having a higher credit limit, which could tempt you to spend more than you can afford to pay off each month. paying late or defaulting on your credit card bills can all damage your credit score.
  • if you have multiple credit cards, it could become difficult to keep track of the due date of each credit card, increasing the chances of missing a credit card payment
  • closing your credit card can also lower your credit score since it will reduce your overall credit limit. so if you are not sure how you want to use new credit cards for the long term, you should avoid applying for the same. 

how many credit cards is too many?

well, no one can tell you the ideal number of credit cards you can have. instead of the number of credit cards, you should focus on the usability and benefits of your credit cards. before you apply for a new credit card, think twice about the points such as benefits, annual fees, credit limit, etc. as long as you keep your credit utilization ratio low and always pay the bills on time, your credit scores will stay strong irrespective of the numbers of credit cards you own. 

check your credit score

don't apply for new credit cards blindly. always check your credit score and report beforehand to verify if you are eligible for that particular credit card or loan. to download your credit report and credit score for free through the CRED.