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Credit Cards

Does Having Multiple Credit Cards Hurt Your Credit Score?

Updated Mar 10, 2023   |   4-min read

Some consumers hold multiple credit cards for a variety of reasons. For example, you might open multiple credit card accounts to take advantage of different rewards programs. It’s not uncommon to have both a travel card and a cash back card.

Or, others might want access to more credit or want to earn multiple sign-up bonuses.

Regardless of the reason, your credit card use can affect your credit score.

If someone has multiple credit cards but their balances are very low, the amount of credit cards they hold likely has little to no impact on their credit score. In some cases, having extra credit lines can even improve their score.

However, someone with multiple credit cards with full balances will see a negative impact to their credit score.

Let’s explore how having multiple credit cards can both hurt and help your credit score.

How Can Multiple Credit Cards Hurt Your Score?

If you have multiple credit cards or are thinking about applying for more than one, consider how it will affect your financial health. Five factors influence your credit score. These factors are, from most to least significant: payment history, level of debt and credit utilization, the age of credit, mix of credit, and credit inquiries.

Level of Debt & Credit Utilization

Level of debt and credit utilization are behind only payment history when it comes to how significant they are in impacting your credit score.

Credit utilization refers to the ratio of credit card balance compared to the credit limit. Essentially, credit utilization measures how much of your available credit you’re using. For example, if your credit card limit is $10,000 and your balance on that card is $3,000, then you’re using 30 percent of your credit.

To calculate your credit utilization, divide your full credit allowance by your credit limit then multiply that by 100. Typically, the lower your credit utilization number, the better your credit card score.

The idea with credit utilization is that for someone with higher card balances, it could be harder for them to pay a new lender back. High credit utilization is a red flag to lenders that the consumer could be overextended.

Managing Payments

Other drawbacks issues to consider with multiple credit cards including managing payments. It can be tricky to juggle multiple payments each month and remain on time with them. If you do forget a payment, that can hurt your credit score as well. As mentioned, payment history is the most important factor used in calculating a credit score.

Credit Inquiries

Another drawback to consider is the effect of applying for multiple cards in a short period can have on credit score. Credit inquiries are reported on your credit history when you apply for a new credit card or most types of loans. If you have too many credit inquiries, it can lower your score.

How Can Multiple Credit Cards Help Your Credit Score?

If you’re considering multiple credit cards, or you already have them, you may find that the extra credit is helpful and can actually help your credit score.

Credit Utilization

First, your credit cards increase your available credit. If your credit utilization ratio is low, that can help increase your credit score. If you have a significant amount of credit available to you through different cards, your credit utilizatoin ratio will be lower.

Diversified Credit

Having diversified types of credit is also good for credit scores. Credit cards are considered revolving credit. It’s good to have revolving debt mixed with credit like installment loans, secured credit, and open credit. For a strong credit score, you’d ideally want several different forms of active debt, without a heavy focus on one type of debt over the others. With that being said, don’t go out and take out loans that you don’t really need.

On-Time Payments

When you have multiple credit cards, you’re also giving yourself the opportunity to improve your credit score by increasing the number of on-time payments you’re making. You can create a more robust history proving you are someone who always makes payments on-time, which not only increases your score in general, but can make you more appealing to lenders in the long-term.

The key takeaways are that, first, having multiple credit cards can hurt your score but doesn’t have to. The primary way multiple credit cards can hurt your score is if you’re using too much of the available credit or have too many credit inquiries. However, if you keep your utilization low and make payments on time, having multiple credit cards can give your credit score a boost.