Building Credit: How Many Credit Cards Do You Need?

Several elements contribute to your credit score, and while the number of credit cards you hold plays a role, it's intertwined with other crucial aspects

If you have one credit card, use it responsibly for routine expenses and pay off the bill in full every month

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A good credit score is the foundation of your financial future. But, building it takes time and patience–like tending to a plant. A strong score gives you easier access to loans, secures better rates, and establishes long-term financial trust. Credit cards are a key tool in this process. However, the question often arises: How many credit cards should you have to build a strong credit score?

While there is no magic number, understanding the factors involved can help you navigate this aspect of credit building. Let’s dive in. 

What Influences Your Credit Score?

Several elements contribute to your credit score, and while the number of credit cards you hold plays a role, it's intertwined with other crucial aspects:

• Payment history: Always pay your bills on time. Even one late payment can hurt your score.
• New credit: Opening multiple new accounts quickly can lower your score due to frequent credit checks.
• Types of credit: A mix of cards and loans shows you can handle different forms of credit, but timely payments or low utilisation are paramount. 
• Length of credit history: Older accounts with a healthy history help build a stronger score.
• Credit utilisation: Use less than 30 per cent of your total credit limit to show you're managing credit wisely.

What’s The Magic Number? 

There's no one-size-fits-all answer but, generally, up to three well-managed cards can be sufficient to build a good credit score. Here's how to do that. 

If you have one credit card, use it responsibly for routine expenses and pay off the bill in full every month. Over time, this can establish a healthy payment history and boost your creditworthiness. 

If you get another credit card, your overall credit limit increases which can help you keep a low credit utilisation ratio. Also, one card can act as a backup if the other is compromised in any way. 

A third card could potentially offer additional benefits like a higher credit limit, or rewards for specific purchases that align with your lifestyle. What’s important is to manage all cards with equal diligence.

Conclusion

Don't fall for the myth that more cards mean a better score. Focus on making timely payments, keeping your credit utilisation under 30%, limiting new credit applications, and monitoring your credit report regularly. Building a good credit score is mostly about how you manage credit, not how many cards you have.

(The author is the Senior Manager-Communications at BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar)