Can Multiple Credit Cards Hurt Your Credit Score?

The answer to this one is a bit tricky. Your credit score is one of the most important metrics you probably need to always keep an eye on, and it’s important to understand what all affects your credit score. So can multiple credit cards hurt your credit score? Yes and No! Here’s why.

Having multiple credit cards affects your credit score in different ways. It can not only improve your score if done responsibly, but it can also wreck your credit score if not does responsibly! A double-edged sword, depending on your situation. So let’s look a bit further into it and see how multiple credit cards can both hurt and improve your credit score.

What affects your credit score?

So first things first. It’s important to understand what all affects your credit score. According to myFICO.com, here is how your credit score is broken down:

1. Payment History: Are all your bills paid on time every month?
2. Credit Utilization: How much do you owe your creditors relative to your total credit limit?
3. Age of Credit: How long have you had your credit cards and loans open?
4. Credit Inquiries: How many new accounts are you opening and have you been applying for new cards?
5. Credit Mix: Are you able to responsibly juggle different types of accounts (credit cards, mortgage, auto loan)?

How do these get affected when I get new credit cards?

Now that we understand how your credit score is determined, it’s important to look at how getting more and more credit cards could either hurt or improve your credit score.

Payment History (35%)

Getting new Credit Cards doesn’t directly affect your payment history. However, juggling multiple cards can cause most to accidentally miss a payment or two. This can definitely impact your credit score really hard, and drop it significantly.

You can avoid this by making sure to automate your finances so that you don’t miss a single payment. So it’s important to only get multiple credit cards if you’re responsible enough to handle them.

Credit Utilization (30%)

Your credit utilization is basically how much of your total credit you’re using at a time. The lower your utilization rate, the better your score.

By opening more credit cards, you can actually lower your utilization rate and in turn improve your credit score. This only works if you don’t max out your cards and instead spread out your credit usage between multiple cards.

For example, let’s say you have a $5,000 credit card, and use $4,000 of it. Your credit utilization rate would be 80%. This would be considered way too high, and would negatively affect your score.

If you opened another card with a $10,000 limit, your utilization rate would drop to 26%. This is a much better utilization, and would definitely improve your score!

Age of Credit (15%)

Okay, so here is where getting more cards could actually drop your credit score a bit.

The overall age of your credit is determined by averaging the age of all your credit cards and loans. When you open new cards, the average age of your entire credit picture is lowered by these new cards, and lenders don’t like to see that. Your score would definitely drop in almost every case.

How much your score drops just depends on your individual circumstance. To some people with a much newer average credit age, it might be a big drop, but if you have mature credit, it might not even be noticeable.

Credit Inquiries (10%)

Every time you apply for a new credit card or loan, the lender performs a Credit Inquiry. This might cause a slight ding on your score.

This is because lenders don’t want to see people applying for multiple cards in a short amount of time. They consider that a higher risk, and in turn, your credit score is affected negatively.

One or two inquiries might drop your score 5-10 points, but the more inquiries you make, the more that adds up. So always be very careful when applying for cards at multiple places, as that might lower your score. Instead, try to space out your applications over a longer period of time

Credit Mix (10%)

Lenders like to see individuals holding multiple types of credit. This might be Credit Cards, Auto Loans, Mortgages, Personal Loans, etc.

So when it comes to credit cards, you don’t want to only have credit cards on your credit score. Make sure to mix it up if you want a high credit score. So in turn, having more than one credit card might be able to slightly increase your credit score.

Should I have multiple credit cards?

Simple answer is yes. A more in-depth answer is, maybe. Depending on your goals and situation, having multiple credit cards can definitely be beneficial.

It can help you not only spread out your spending by maximizing points and rewards earned between your cards, but it also lowers your overall credit utilization. It also helps in increasing your credit mix.

It does come with a big but though. Having multiple credit cards can be very financially damaging if you aren’t responsible with it. Maxing out one credit card is one thing. But maximizing 5 credit cards can be financial suicide! So only get multiple cards if you are careful, diligent, and responsible.

Final thoughts

There is no one answer that fits all with this question, but with all the information provided in this article, it can help you make smart and educated decisions

Do you have multiple credit cards? If so, let me know in the comments below! Thanks for reading 🙂

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