More cards, better score? The myth and the reality

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Many people think that having more credit cards automatically makes your credit score better. While there is a grain of truth in the notion that more cards can be good for your score, the situation is a lot more complex. Your credit score isn't just about the number of cards you have in your possession, but the way you utilize them. Considerations such as credit utilization, payment history, and the age of your accounts are far more influential than the number of cards you have.

How having multiple cards can help

Having many credit cards can be useful in certain ways. The most obvious benefit is the effect on your credit utilisation ratio. This refers to the amount of available credit that you are currently using compared to the total credit available to you. As an example, if you carry just one card with a limit of ₹50,000 and an outstanding balance of ₹10,000, your utilisation is 20%. If you carry three cards with a combined limit of ₹150,000 and still only spend ₹10,000, your utilization decreases to around 6.6%, which is viewed as better by credit bureaus.

Additionally, distributing your spending among several cards will make it possible for you to keep utilisation ratios low on individual cards, and managing responsibly more accounts proves to creditors that you can use credit responsibly. In the event that you pay balances in full and on time, the impact on your credit score may be beneficial.

The disadvantages of too many cards

But many credit cards are not without dangers. Every time you apply for a new card, the bank makes a "hard inquiry" on your credit report, which will temporarily decrease your score. Opening a large number of accounts in a brief period can also decrease your average account age, which can be damaging to your score in the short run.

More cards equal more due dates and the risk of missed payments. Missed or late payments negatively affect your credit score. There is also the risk of overspending, which can easily result in accumulating debt if not handled wisely.

What do lenders search for India's top credit bureau, CIBIL, states that a good credit score is between 700 and 900. Lenders check credit history, payment behavior, outstanding, and the type of credit account mix. It's positive to have a combination of secured and unsecured credit accounts. Merely owning several credit cards and not using them well will not improve your score and could even trigger doubts about your credit behavior.

Best practices for handling multiple cards

To make multiple credit cards work for, not against, your credit score:

• Always pay your bill on time.

• Maintain low utilisation—preferably below 30%.

• Refrain from applying for multiple cards at the same time.

• Monitor statements regularly for errors or fraud.

• Use cards every now and then to keep them in circulation, but don't have large balances.

More credit cards will not necessarily improve the credit score, but managed wisely, they can help in a positive manner. The essence is in having controlled financial behaviour: on-time payments, small balances, and strict monitoring. Provided you maintain all of these, several credit cards can serve as a way of establishing and strengthening a strong credit history.