Pros and cons of multiple credit card on CIBIL score

Credit Information Bureau (India) Limited:

Let’s start with, what CIBIL score means to a multiple credit card holder…! CIBIL Score is a three-digit numeric summary of credit history. The CIBIL Score is generated from the credit history found in the CIBIL Report. CIBIL Score is a three-digit number range from 300-900 which shows financial reliability or a credit of a particular person. Banks and financial institutions verify CIBIL score to verify if it is appropriate or not, to allow you any financial liberty to anything. And it’s also made conditions for its approval. A CIBIL Score of 750+ is ideal for showing excellent financial credibility and reliability in the credit market.

Multiple credit cards clearly reflect that you are financially reliable as there are certain criteria even for having a credit card like your monthly minimum income, salary package, credit history, and loans. Until you don’t fit that criteria, you won’t even have a credit card from a few banks. Yes, there are banks who provide credit cards without asking for such crucial information but for multiple credit cards you should provide your financial details. Later on, it impacts on your CIBIL score negatively or positively, depending on how smart you are on utilizing multiple credit cards. it’s better that you regularly check your CIBIL score to know the impact of multiple credit cards on your CIBIL score. There are many sites on which you can easily check credit score online.

Pros and Cons of Multiple Credit Cards Affect Your CIBIL Score:

When one has multiple credit that empowers him to make more payment in a shorter period of time that definitely empowers his credit score. But when it comes to making payment of all the credit simultaneously it is quite tough obviously

Maintain a good payment history:

It’s vital to pay your bills before the due date to prevent any kind of defaults and charges. Make an alarm to pay bills and set an auto deduct facility to get rid from stress of bill payment. Just relax for CIBIL score now. Regularly monitor your credit utilization ratio to remain within the healthy range of 30% or lesser. Maintaining such a balance between your credit utilization and available credit limit is crucial for a good CIBIL score.

Regular Payment build Positive Payment History:

Timely paid Multiple credit card bills show positive financial behavior and reasonable use of multiple credit cards. Having multiple credit cards can have both positive and negative impacts on your CIBIL score. Let’s note Here are several advantages and disadvantages to consider:

Pros:

1. Maximize credit limits: If you have multiple credit cards, you will have access to a higher overall credit limit. It will have a favorable effect on credit score.
2. Improved credit utilization ratio: Having multiple credit cards can lower your credit utilization ratio, which is the amount of credit you are using compared to the limit on your credit cards. Better leverage your credit card to enhance your credit score.
3. Diversification of credit: Lenders like to see that you have a mix of credit types, such as credit cards, loans, and mortgages. Having multiple credit cards could help diversify your credit profile.

Cons:

1. Difficulty managing payments: Multiple credit cards can be difficult to manage, as you will need to make payments before multiple due dates. If you forgot a payment, it can negatively impact your credit score. It will charge a penalty as well. Multiple credit cards are troublesome as there is the possibility of late payment and delay in payment. This led to risk to your CIBIL Score. For a credit card user, it’s quite important to make a payment on time to encourage financial credibility. Making timely payments is crucial to your credit health, and it can become quite a task to do that and keep track of due dates
2. Increased debt: Having multiple credit cards may lead you to spend more than you can afford, which can increase your debt and negatively affect your credit score. You will spend access even though you sometimes if you don’t need it. As you will have a variety of offers on multiple credit cards. It makes you greedy. e.g., 10% off on SBI credit card, 5% instant discount on HSBC credit cards and so on.
3. Increased credit inquiries: asking for multiple credit cards can result in multiple questions on your credit report, which can negatively impact your credit score.
4. Credit mix: Lenders monitor credit types on your credit report, including credit cards, loans, and mortgages to study your financial background. Having a variety of credit can positively impact your credit score. However, this factor alone should not be the sole reason for having multiple credit cards.
5. Annual fees and costs: Consider the annual fees and costs associated with each credit card. Having multiple cards could mean paying multiple annual fees, which may be useless if you don’t use the cards enough to justify the fees.
6. Personal preferences and convenience: Finally, consider your personal preferences and convenience. Some people prefer to have only one or two credit cards for simplicity, while others may prefer the convenience of having multiple cards with different benefits.

How Having Multiple Credit Card Decrease Your CIBIL Score:

• Create multiple hard inquiries on your credit report in a short time is questionable to your CIBIL score. It looks unfavorable. It shows a decrease in average age of credit history.
• Delay in paying credit card bills is not favorable to making positive CIBIL. It shows that you are financially unstable.
• Difficult to keep track of the due date. As it’s quite tough to maintain all financial records and remember to close all the bills.
• Closing your credit card can also lower your credit score, it will raise questions on your financial situation?

What to consider before applying for multiple credit cards

What to consider before applying for multiple credit cards depends on several factors. Let’s see how to decide the number of credit cards are right for you:

• It’s totally up to your Credit management skills. If you are able to manage multiple credit cards responsibly. If you lack or struggle on spending with debt management, it may be best to limit the number of credit cards you have.
• Of course, your Credit utilization ratio is the amount of credit you are using compared to your total credit limit. Honestly, it is wise to keep your credit utilization ratio below 30%. If having multiple credit cards allows you to maintain a low utilization ratio, it could have a positive impact on your credit score.
• Rewards and benefits offered by multiple credit cards by the bank are very crucial as rewards programs, cashback, or other benefits. One must study their own needs based on these factors before having multiple credit cards. If you can maximize your rewards by strategically using multiple credit cards, it may be worth having multiple cards.

Conclusion

Overall, if you are good at how to utilize your credit card usage and can manage multiple cards perfectly, it will make a positive impact on your credit score. However, if you have to make efforts to manage your payments or tend to overspend, it is a wise decision to keep only one or two credit cards. Ultimately both will have a result on your CIBIL score.

In short, the final take on how many credit cards to have should be based on your individual financial needs and situation, financial skills, and individual requirements. It’s important to use credit cards smartly without compromising your financial credit.