Can use more than one credit card hurt your CIBIL score?

Did you know? A decent credit card CIBIL score is an important prerequisite for the approval of a credit card application. But that’s not where its importance ends. Once you obtain a credit card and start using it to make payments, online and otherwise, all of it contributes to building a better score and maintaining it. Even timely credit card bill payments play a major role in boosting your CIBIL score.

What happens when you hold more than one credit card? How does that impact your CIBIL score? Does having or using more than one credit card, simultaneously, hurt your CIBIL score?

Well, the simple answer is, no, having multiple credit cards, on its own, does not ruin your credit card CIBIL score given you use them responsibly. However, there is more to it. There are several factors that can have a negative impact on your CIBIL score and one of them is, indeed, using multiple credit cards simultaneously.

Let us break it down for you.

But before we get into that, let’s understand what exactly a credit card CIBIL score is. Issued by the Credit Information Bureau (India) Limited (CIBIL), your CIBIL score is a mathematical summary of your creditworthiness. Credit card issuers and lenders use this score to determine your repayment history and decide whether they should issue a new credit card to you or provide you with the financial assistance that you’ve applied for.

And while using multiple credit cards at once does not affect the score, using them all at once can. When using multiple credit cards, it is extremely necessary to ensure that there is no outstanding debt beyond the grace period. It will make your credit score dip and prevent you from accessing any additional credit cards and financial assistance in the future.

So, what causes your credit score to reduce?

Not paying your dues in time, only paying the minimum bill amount due for a prolonged period of time, default in paying the EMIs, multiple credit card and loan applications, etc., are a few things that can cause your credit score to plummet.

And how exactly does using multiple credit cards affect your credit score?

Some of the ways in which using multiple credit cards can affect your CIBIL score include the following:

Multiple applications at a single time:

Now, this happens even before you’ve obtained multiple credit cards. When you apply for credit cards, the issuers initiate an inquiry about your credit history. This helps them assess the risk involved in issuing credit cards to you. Each such inquiry can knock off a few points here and there from your credit score, resulting in a lower score.

Not making payments:

Using multiple credit cards is completely fine – if you use them responsibly. If you keep a track of the due dates for bill payment and always make full payment within the grace period, using multiple cards will not land you or your credit score in any trouble. However, when you fail to make your payment within the grace period, the credit card score eventually decreases.

Credit hungry behaviour:

If you use one credit card to pay the bill of another credit card. In such a scenario, you are simply transferring your debt and not really repaying it. It is a slippery slope that can lead you to a pile of debt. This can reflect poorly on your credit score and increases the chances of your loan applications being rejected. Once your application is rejected, the credit card CIBIL score goes even further down.

Credit Utilization Ratio:

When you use a credit card to make payments on a regular basis, one thing that you must, at all times keep a check on is your credit card utilization ratio. The ideal credit card utilization ratio should be around 30%. This is tricky to maintain when you own several credit cards and not maintaining it will only make you come off as someone with responsible spending habits.

It is fairly easy to keep a tab on this too. For example, if you hold the Bajaj Finserv RBL Bank SuperCard and you want to know your CUR, you can simply get in touch with the RBL Credit Card Customer Care, and they will walk you through the calculation. And once you get the hang of it, you can also do it on your own, without any help!

Conclusion:

If you have a low credit card CIBIL score, using your credit card(s) responsibly is one of the easiest ways to improve the score. Also, you should only apply for multiple credit cards if you need them. Just because a new product in the market has one innovative feature doesn’t mean that you must apply for it. Always make sure to do your own research and apply for only those credit cards that you actually have a use for.