Managing credit cards is a crucial aspect of your financial journey. One common question that often arises is how getting a new credit card can affect your credit score. In this article, we will explore the impact of acquiring a new credit card on your credit score and address some common concerns regarding this matter.
Does having multiple credit cards affect your credit score?
Having multiple credit cards can indeed influence your credit score. Credit score is a numerical representation of your creditworthiness and is based on various factors, including your credit history and how you handle credit accounts. When you open a new credit card, it can affect your credit in several ways.
How does having multiple credit cards affect your credit score?
When you obtain a new credit card, it may lead to a short-term decrease in your credit score. This is primarily because the lender will make a hard enquiry into your credit report to assess your creditworthiness. Multiple hard enquiries within a short period can raise concerns about your financial stability and may signal a higher credit risk.
Moreover, adding a new credit card also reduces the average age of your credit accounts, which can have a slight negative impact on your score. The length of your credit history is a factor in determining your creditworthiness, so opening a new account can affect the overall age of your credit profile.
On the positive side, having multiple credit cards can improve your credit utilisation ratio if you maintain low balances on all cards. A lower credit utilisation ratio of 30% or less indicates responsible credit management and can boost your credit score.
Can multiple credit cards hurt your credit score?
While having multiple credit cards itself does not necessarily hurt your credit score, it can become problematic if it leads to uncontrolled spending and missed payments. Accumulating debts on multiple cards can quickly escalate and become challenging to manage. Missing payments or carrying high balances relative to your credit limits can significantly damage your credit score.
How many credit cards is too many?
There's no one-size-fits-all answer to this question. The right number of credit cards for you depends on your financial discipline and ability to manage them responsibly. For some, having two to three credit cards might be manageable, while for others, even one card could be sufficient. Consider your spending habits, payment history, and financial goals before deciding to apply for new credit cards.
Obtaining a new credit card can impact your credit score, both positively and negatively. Managing multiple credit cards responsibly by maintaining low balances, making timely payments, and avoiding excessive credit enquiries can strengthen your creditworthiness. If you're looking to build a good credit score, the Bajaj Finserv Credit Pass can be an excellent tool to help you achieve your financial goals. It allows you to track all your credit accounts and the factors that impact them from your personalised dashboard. Furthermore, interactive tools such as the Credit Score Simulator and the EMI Calculator empower you to make informed decisions and better prepare yourself before applying for new credit products.
