The question of how to handle credit when you own two or more credit cards props up more too often, especially citing the growing trend in credit card usage and banks luring customers with lucrative offers on a number of credit cards. While some people are of the opinion that having two or more credit cards to their name gives them the opportunity for a better credit outlook, some others opine that owning more than two credit cards can potentially entrap them in a pernicious debt web. As a matter of fact, both opinions can override each other on one premise – handling of credit. So if you are a customer who owns more than two credit cards, you have two choices – to handle credit wisely and effectively and improve your credit score, or nosedive into the debt pit through mismanagement of credit.
Firstly, let us understand how credit scores work. Your credit score is calculated by accounting for various parameters including credit payment histories, the amount of credit used against the limit allocated to you (ideally, using more than half the credit limit allocated to you might work against a good credit score), your defaults, and other parameters. Usually if your credit score is low, your loan or credit card application might not see light. Even if the bank or financial institution does approve your credit application, you are most likely to pay a higher interest rate. Thus, credit scores are crucial to getting your future loan or credit applications approved.
Coming back to the question of how your credit scores can improve with more cards, well, more the cards in your name, greater the combined credit limit. A larger credit limit will give you more breathing space to use your credit and the ratio of credit used to permissible limit will end up being low, thereby helping a better credit score.
This is perhaps a question that often dogs the minds of credit card users. Although suggestions can be understood in theory, putting it into practice might very well be difficult. Owning multiple credit cards means keeping a closer tab on your credit usage and planning more effectively. This certainly takes more effort, as you have to make sure you don’t miss your payments and avoid overusing one particular card. Moreover, prioritising your repayments will definitely work well to positively impact your credit score.
Firstly, your credit limits depend on your income – so making sure most of your income doesn’t end up in credit card repayments should be a paramount priority. Secondly, managing your credit on each card is the next step. As a matter of fact, having multiple credit cards can put you at a psychological disadvantage and lead you to mishandle credit simply because you have the opportunity to spend and purchase all those cool gadgets or clothing wear you always wanted.
Following these steps will make sure you handle your credit wisely and effectively. Prioritising multiple repayments will also work well to improve or maintain your credit score.