Multiple credit cards and your credit score: The pros and cons?

Why people opt for multiple cards
Many customers now have more than one credit card in order to get higher credit limits, special rewards, or discounts. Several cards also act as an insurance — if one is at the limit or temporarily suspended, another can take sudden cost overruns. Although this flexibility sounds great, it makes one ask how it affects your credit score.

How multiple cards can enhance your score
Indian credit scoring systems such as CIBIL penalize abuse of multiple cards. Keeping the total credit utilization ratio (ratio of credit limit utilized) low on all cards can improve your score. Timely payments on multiple accounts are also indicative of good credit habit, which is well welcomed by lenders. In fact, having multiple cards can help raise your score if balances are spread over and bills are paid promptly each month.

Dangers of managing too many cards
The negative is invoked when balances add up or payments are in arrears. One late payment on a card can damage your credit score significantly. Several cards also increase the desire to spend too much, raising the possibility of a high credit utilization ratio. A string of cards opened in a brief period can also lead to "hard inquiries," which can lower your score temporarily.

The proper method for using more than one card
Experts advise limiting yourself to the number of cards that you can manage responsibly. Maintaining credit utilisation at below 30% of credit offered, setting up auto-debits for bill payments, and regular statement reviews can help. Having each card serve a purpose strategically — i.e., one for travel rewards and one for food savings — creates benefits with no cost.

Long-term impact on your financial welfare
When managed correctly, having several credit cards can help build your credit record, enhance your loan eligibility, and open doors to lower interest rates. But misuse can result in permanent damage, limiting your ability to borrow in the future. It is really not the quantity of cards that matters, but how responsibly they are utilized that will make your credit score go up or down.

Impact on future borrowing decisions
Your credit rating isn't the only thing checked by lenders — they consider your total credit exposure. If you have several cards with huge available limits, banks will consider whether or not you could be taking on more debt than your budget can handle. While not necessarily a negative, this factor can influence the amount you're qualified for when borrowing money to buy costly items like houses or cars.