Nowadays, credit cards have several features. For example, you can get travel rewards or movie tickets while some cards give discounts on fuel charges or IRCTC ticket booking.

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To avail such kind of benefits, many people take more than one credit card. But, the question is, can having more cards deteriorate the credit score?

 

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People can note that having multiple credit cards may or may not ruin your credit score.

How is credit score determined?

Your credit score is used to determine how likely you can repay the loan that you have taken. These five things are kept in mind while deciding the credit score -

1. Payment History.

2. How much of the credit is used.

3. How old is the credit history.

4. Inquiry about new loan.

5. Types of loans taken.

Why does credit score deteriorate?

Applying for more than one credit card affects loan inquiries and credit utilization. Both of these account for 40 percent of the credit score. Whenever you inquire about a loan, the lender checks your credit score.

If the credit score is being checked repeatedly, then it means that you are looking to take more loans. In such a situation, the chances of default will also be high. Hence the credit score may deteriorate. However, this only changes the credit score by a few points.

Does the use of credit limit matter?

Utilisation of loan is a big factor as it has 30 percent share in credit score determination. When you take more loans through a credit card, it lowers your credit score.

Suppose you have a credit card whose limit is Rs 1 lakh and you are using the full limit, then your credit score will be very low.

If you have taken another credit card of the same limit and are using 20 percent ​​of its limit, then taking another card will improve your credit score as your total limit has increased to Rs 2 lakh.

How to improve credit score?

1. Avoid having more credit cards unnecessarily.

2. Use credit limit sparingly.

3. More than one credit card is not always bad. If it is managed well, then your credit score can also increase.