Living with Multiple Credit Cards
Better Credit…Better Options
Having many credit cards can be a source of concern for some, particularly with regard to the potential impact they may have on an individual’s credit score. Keeping two credit cards and using them judiciously, however, may even be more advantageous than having only one card. As always, consumers need to keep a watch on their activity, use their credit cards wisely, and make sure that they can afford the repayments.
High debt utilization of a single card can lower a credit score. This happens, for instance, if you have only one credit card but regularly use it near its maximum credit limit. The rule of thumb is to use only between 10 percent and 30 percent of the available credit or even more ideally under 10% if possible. This will help in improving your credit score.
Following this guideline, it would be advantageous for some to keep several credit cards. Purchases in a given month can be spread out among various accounts, thus enabling low credit utilization for each credit card. A lower credit utilization ratio helps significantly in improving credit score. This ratio is just one of the factors considered in the FICO credit scoring model, but it accounts for 30 percent of the total credit score. Bear in mind though that opening new credit card accounts lowers your average length of credit history and also puts a credit inquiry on your report which both could lower your credit score.
An array of credit cards used wisely can likewise be beneficial in terms of the different rewards awarded on every purchase using the cards. These can range from rebates or discounts on future purchases. Rotating usage of the cards to optimize these bonuses and rewards can result in substantial savings over a certain period of time.
It is equally important to maintain some kind of balance, which means that consumers should never obtain more credit cards than they can keep track of. Having too many cards will make it quite difficult to monitor each billing cycle. Missed payments will definitely lower your credit score.
Our free consultation provides a significant amount of free credit education and can be based on your individual credit report as well.