Impact of Multiple Credit Card Applications On Credit Score

While getting a new credit card may decrease your debt utilization ratio which is meant to be beneficial to a credit score applying for several new credit cards in a short period of time may have a negative impact on your credit score. A debt utilization ratio or the balance to limit ratio is the total of your balances divided by the total of the credit limits on all your credit cards combined.

Having more cards can increase your total available credit limit hence reducing your balance to limit ratio.

However just as importantly credit scoring model considers the payment history associated with different credit card accounts. If you have one or two credit card accounts that you use judiciously and make ready payments on them every month than even to credit cards can help build a good credit history with a good credit score.

When you suddenly get additional credit cards with no payment history associated with them your credit score make be negatively impacted at first because there is no information present as to suggest how you are going to use this additional line of credit. Since it is unclear as to how you are going to handle the additional debt the credit score may not improve till the time that you start using the card is moderately.

The second aspect of getting more credit cards is the viewpoints that a lender might take. Applying for several lines of credit in a short amount of time might suggest to the lender that you are facing financial trouble and are trying to make up for the shortage of money by incurring lots of debt. It is advisable to avoid applying for a lot of credit cards if you are intending to apply for a more serious loans such as an automobile loan or a mortgage in the near future.

The bottom line is that it is not necessary to have a lot of credit cards to establish a good credit history. It is important to use the available few credit cards judiciously by keeping the balance on them as low as possible. Used to credit cards within the means of income without overspending and taking on debts that you cannot repay and you will build a healthy credit score for yourself in no time.

It is possible to have as good a credit score with two credit cards as you can with a dozen credit cards.