A credit score is more than a number—it’s their financial reputation. Whether you’re applying for a loan, trying to rent a home, or even getting a job in certain industries, a good credit score can help you do that. If you’re interested in improving your credit score, you may be surprised to learn that opening a second credit card could be a great idea.
It is going to sound counterintuitive. After all, doesn’t more credit equal more risk? Not necessarily and a responsibly managed second credit card can help build your credit profile since it can improve the components that drive your credit score like credit utilization, credit history, and payment history.
In this blog article, we will discuss ways that a second credit card can help improve your credit score, and how to use it wisely to maximize the impact.
1. Reduces Your Credit Utilisation Ratio
Your credit utilization ratio is one of the biggest factors that impacts your credit scores, which is the amount of your available credit you’re currently utilizing. You should aim for a good credit health by keeping your usage below 30%, according to the guidance.
For example, if you have one card with a ₹100,000 limit and you generally put ₹30,000 on per month, then your usage would be 30%. Now, if you get a second card with its own ₹100,000 limit, then your total available credit would be ₹200,000. Since you used the same ₹30,000, your usage ratio now shows 15%.
That lower utilization ratio illustrates to the credit bureaus that you’re not overly reliant on credit, which is good for your scores.
Therefore, even if you’re not looking to use additional credit, a higher credit limit can also still be good for you – as long as you’re using it at that same pace!
2. Creates a Stronger Credit Mix
Credit bureaus like borrowers who can manage a variety of types of credit, which is referred to as credit mix. This can include credit cards (revolving credit), loans (instalment credit), and other forms of credit.
If you currently only use one credit card or only have instalment loans (such as your car loan or personal loan), adding in a credit card is a way to diversify your credit profile and over time, and improve your credit profile.
This is a signal to lenders that you can manage various credit lines successfully making them more confident in you to handle larger financial commitments.
3. Helps Improve Payment History
Your payment history is the largest influencing factor for your credit score. It makes up more than 30% of your overall score. Every time you have an on-time payment, it is added as a positive mark to your credit report.
With a second credit card, you will be able to financially prove that you can make on-time payments. More positive payments in your payment history, improves your appearance of being able to make payments on time to lenders.
Just remember to:
- Set up auto-pay or reminders to help you not miss a due date
- Pay your dues in full, so you don’t pay interest
It may take only one late payment to ruin your score, so as long as you are consistent, you’ll be fine.
4. Lengthens Your Credit History
The length of your credit history (length of time you’ve had your accounts) counts in your credit score. The lo ng er and more stable your credit history, the more trustworthy you look to lenders.
Opening a second credit card adds an account that, over time, will contribute positively to your average account age, particularly since you will leave both cards open long-term.
A new credit card could lower your average age a bit initially, but the long-term benefit is establishing multiple accounts with a clean, long history of timely account payments.
5. Provides a Backup Without Emergency Borrowing
Too many people are forced to take personal loans or emergency high interest borrowing because they have no credit available. Their only option for immediate cash flow would be using a credit card and they have haven’t any cash reserves to pull from the future borrowing options of personal loans or high-interest payday loans don’t matter.
Having a second card gives you extra cushioning with credit available, so you won’t max out your only card you have left or miss a payment under duress.
Not only does this give you more options with borrowing options and access to cash but also avoid using credit to quickly access credit that potentially impacts your overall credit utilization in a month and can impact your overall credit score.
Some second cards even have balance transfer or interest free periods if you know you’ll want to use them as a back-up credit account with no risk to enrol. Getting a second credit card will not get you a better credit score. But it absolutely can increase your financial options and make you a better credit user when used responsibly. It helps lower your credit utilization, gives you credit mix, allows for consistent payments, and helps strengthen your credit history, all of which are critical components to your credit health.
Conclusion
You will only reap these benefits if you’re able to stay disciplined. Don’t overspend, and make sure you’re still paying your bills on time and tracking both cards to avoid potential debt. Kiwi does this for you, it tracks your spendings in their app and provides real time cash back on all transactions A second credit card is not a license to spend more money; it is a way to help you develop the discipline of a better credit user and improve your credibility over time.
If you have confidence in your ability to manage money, a second card could be the best move to a better credit future and the smart option is Kiwi Credit Cards. It is a virtually available and lifetime free credit card that is fully virtual and links directly to UPI allowing payment with credit at all UPI enabled business – online & offline. It also provides airport lounge access at domestic airports when you hit milestone spends, and compliant credit card issuance (no waiting to build credit!). Whether your goal is improved credit health or something else entirely, Kiwi is a powerful and modern solution that has flexibility and control.
Apart from improving credit score using second credit card also brings a lot of rewards for users. We have discussed the same in our article ” How to Maximise Rewards by Using Multiple Credit Cards?”
