Very few people own only one credit card. Most of us have several, at least 2 or 3. But what does this mean for our credit scores? This article will answer this question and tell you everything you need to know.
First of all, having several credit cards does not hurt your credit score. The only thing that matters is how you use those credit cards. If you didn’t know it yet, your credit score is calculated by looking at five different factors, some of which are more important than others:
- Payment history – it makes up 35% of the entire credit score
- Amounts owed – 30%
- Length of credit history – 15%
- New credit – 10%
- Types of credit in use – 10%
If you want to boost your credit score, start by making all your payments in full and on time. Not paying your bills on time will definitely lower your score. And so will carrying high credit card balances compared to your credit line. That’s why it’s so important to always use 20% or less of your available credit. But this is one situation where owning several credit cards can be a really good thing. If you have much more available credit than you actually need to use, your credit utilization ratio is more likely to be below 20%.
Owning several credit cards can hurt your score, but only if they’re all new. It’s because opening several different accounts in a short period of time can make the credit card company think that you’re a risky borrower. Also, when you open several new accounts all at once, it lowers your average account age, and this will cause your score to drop.
Additionally, if the only type of credit you have is in the form of credit cards, your credit score will drop. But this is still no reason to go out and get other types of loans. Make sure that you only borrow money when you really need to.
Your credit score depends on a lot of things, not just one. If you’re responsible and smart, you can have as many credit cards as you want while also enjoying a great credit score.