In case a borrower is holding multiple cards then supposing a borrower has 5 different cards but the utilisation is 10 per cent for each card, they are good.
New Delhi: Keeping multiple credit cards has become quite common in urban areas especially upper-middle-class and upper-class population. Borrowers may often wonder if holding multiple credit cards can impact their CIBIL or credit score negatively. As per experts, having multiple cards may not affect the CIBIL. However, the lack of disciple in repayment, over utilising the credit limit and making multiple enquiries may impact it.
For the uninitiated, CIBIL or credit score is basically a number between 300 and 900, which is calculated by the credit information companies in India. If one’s credit score is above 750, it is considered an excellent and good score and the borrower is deemed creditworthy. A score between 650 to 750 is an average and fair score and below 650 is a score which one needs to look out for. Low credit score leads to lenders deeming the borrower unworthy of credit and thus they may have trouble getting loans approved.
The CIBIL score is evaluated and determined through a complex mathematical formula that is based on several parameters such as credit history, repayment history, utilisation, number of enquiries made and credit mix etc. When a person is holding multiple credit cards, it may be difficult to maintain these factors which may lead to negative impact on credit score.
Note that repayment history is one of the important factors in shaping the CIBIL score. Repayment history is whether the borrowers have paid their EMIs or credit card bills in full on time. Every time the borrower misses a payment, it is recorded into the credit sheet and that impacts the credit scoring, in case the repayment record is not clean. While holding multiple cards is okay, if one fails to make the payment of those cards on time, the score will definitely be impacted.
Another important factor in determining CIBIL is credit utilisation meaning if borrowers have a credit limit of Rs 100, how much of that Rs 100, on monthly basis, are they using. For instance, if borrowers use up to Rs 60, that means 60 percent utilisation and they can be seen as credit hungry or cash-starved. Whereas, if they are using only 10 percent of the credit limit, they seem to have enough credit whenever they need it. So, they are looked upon favourably.”
In case a borrower is holding multiple cards then supposing a borrower has 5 different cards but the utilisation is 10 per cent for each card, they are good. However, if it’s going be 80 percent to 90 percent, it reflects they are very credit hungry which is not a good sign. This meansd that holding multiple cards is okay, until and unless the borrower maintains a fair utilisation ratio.
Number of enquiries one makes is another factor in determining CIBIL score. The higher the enquiries, the higher the credit hungriness reflects. So, the enquiry is something which one needs to watch out for. While having two-three credit cards isn’t going to be hard on the score, however, opting for too many cards, and triggering too many enquiries can be often severe and may impact score credit score negatively.
