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Credit cards are square pieces of plastic having your name embedded onto it and carry a direct link with your financial accounts. Like most of the people, you might also be owning one to three credit cards in your wallet. Yet these pieces of plastic could have a great impact on your credit and your overall financial conditioning. As per one survey in America, an average of 60% of Credit Cardholders have an approximate debt of more than 10,000 dollars. This kind of debt can severely affect the credit scoring which in turn would polish the in-eligibility to get a mortgage or even to purchase a recharge plan.
Five factors that could be affected by the number of credit cards owned: Payment history, debt-to-credit utilization, length of credit history, credit mix, new credit
Let’s Expand the Meaning of each of these factors
The pay-backs done for any purchase on credit account are listed in the Payment History. The amount which was levied through the credit card and the time to each pay-back is evaluated into the history. Every single credit account’s readings are established into history. How and why this factor is important? The answer is that history explains your wise behavior and dealing if it is on a positive edge then lending more credit is all secure and thus the credit score has risen. Whereas if Payment History reflects any negative instances showing late paybacks then the credit score becomes low.
The ratio of your debt to the credit limit available on every credit accounts owned is known as Debt-to-credit utilization. More is the ratio
Length of Credit History
One year of working with credit accounts is obviously less valuable when compared with the three years of consistent working on credit accounts. The time of the credit history makes to the length of credit history, and therefore as the time extends and you maintain the proper transactions/pay-backs with the credit account- the credit score hikes proportional to it.
As you get new credit in your accounts- Yes, it is also calculated to generate the credit score. All accounts should have good new credit in a certain period of time so as to make that better hike in the credit score. So, if you could make it out, more credit accounts are hard to generate the new credit, therefore, the lesser chances to maintain better credit scores.
After finding all these factors one thing is revealed that it is harder to maintain all these aspects for multiple accounts at once. Thus, it is better to own a minimum number of credit accounts other than having too many.
The credit score is really valuable as if this score goes down then it becomes difficult to pass out for getting the mortgage, paying out the rent and even the mobile phone bill payments. It takes a worth of time to build the credit score and is not a matter of just a few days or even a few months. Keep utilizing your accounts and pay back the debt wisely with each of the monthly installments swiped on time.
How Many Credit Cards are Best to have?
2 or 3. This number of credit cards is best to own, the highest credit score can be achieved and the ease of managing all these accounts rises. Anyone willing to keep only one single credit card can do it yet having multiple accounts tend to showcase the credit factors in the history from different accounts making it realistic to gain more credit score growth at a faster rate.
Here’s the conclusion to the inquiry Keeping more credit cards is not a matter until and unless all those cards are utilized to some extent and their pay-offs are done wisely. Still, keeping too many cards must not be in your mind as this definitely affects the overall credit score. One single card with more credit limit is enough rather than keeping too many cards to obtain that same limit. Obviously, this takes the same time in both ways to extend the credit limit- either in a single credit account or having a combined credit limit of multiple accounts.
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