Can More Than One Credit Card Affect Credit Score, How Is Credit Score Determined? EXPLAIN
These days, credit cards have several characteristics. For example, you can get travel rewards or movie tickets, while some cards offer discounts on fuel costs or booking IRCTC tickets.
To benefit from these types of benefits, many people take more than one credit card. But the question is, can having more cards hurt my credit rating?
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People may notice that having multiple credit cards may or may not ruin your credit score.
How is the credit rating determined?
Your credit score is used to determine the likelihood that you will be able to repay the loan you have taken out. These five things are kept in mind when choosing a credit score –
1. Payment history.
2. How much of the credit is used.
3. How old is the credit history.
4. Request for a new loan.
5. Types of loans taken out.
Why is the credit rating deteriorating?
Applying for more than one credit card affects loan applications and credit usage. These two elements represent 40% of the credit rating. Whenever you inquire about a loan, the lender checks your credit score.
If the credit score is checked several times, it means that you are looking to take out more loans. In such a situation, the chances of default will also be high. As a result, the credit rating can deteriorate. However, this only changes the credit score by a few points.
Is the use of the credit limit important?
The use of the loan is an important factor as it has a 30 percent share in determining the credit score. When you take out more credit card loans, it lowers your credit score.
Suppose you have a credit card which limit is Rs 1 lakh and you use the total limit then your credit score will be very low.
If you took another credit card of the same limit and you use 20% of its limit, taking another card will improve your credit score as your total limit has increased to Rs 2 lakh.
How To Improve Your Credit Score?
1. Avoid having more credit cards unnecessarily.
2. Use the credit limit sparingly.
3. More than one credit card is not always bad. If managed well, your credit score can also increase.