Despite what you might initially think, it turns out that you can turn having more credit cards into having a higher credit score and overall improved credit report. In fact, approximately 46% of Americans have more than two credit cards. This is entirely dependent on how smart you are with your spending. However, if you are brilliant with your budgeting you can have as many credit cards as you want. Don’t believe us? Keep reading!
Utilize Your Utilization Ratio
The logic behind having more credit cards as a credit score booster comes down to what is known as your credit utilization ratio. This ratio is the amount of credit you are currently using divided by the amount of credit available to you. The lower the ratio, the better your credit score. Typically, you want to have your ratio be 35% or less.
Having more credit cards (that you use wisely, of course) allows you to improve upon the ratio because it increases the amount of credit available to you. As long as you keep maintain the amount of credit you utilize as you increase the amount of credit you have access to, the ratio will decrease and your credit report will improve.
Controlling Your Credit Cards
Now that you know why it’s a good idea to have multiple credit cards, we can talk about how to use these credit cards wisely. Just because we are saying that more credit cards are a good thing does not mean we are advocating spending frivolously with them. On the contrary! To keep your credit utilization ratio low, you need to proportionally maintain or lower the amount of available credit you are using as you increase the amount of the line of credit you have. Basically, don’t spend more just because you have more cards. Keep your spending habits conservative and focus on one thing: categorizing.
By having a credit card designated to one expense you are able to accurately track your spending and stick with your budget. Also, spotting fraudulent charges becomes evident much more rapidly and can be addressed in a timely manner.
The most important thing to remember is that you can really keep your spending rules in check. Your gas credit card is for gas and that is it. Your grocery credit card is for buying groceries and that is it. If you are ever spending money on anything that is not one of these two categories, then these two cards stay tucked away in your wallet.
