How Many Credit Cards are too many for Credit Score?
A good credit score is invaluable in today’s economy, since more and more consumers are finding themselves in debt. The average consumer is carrying $5K in credit card debt, and many have even more than that. Building good credit means using your available credit wisely. And that raises the question – how many credit cards should one carry? Is there such a thing as having too many credit cards? How does carrying multiple cards affect one’s credit score?
To build points on your credit report, you want to show that you do not borrow more than you can pay back. Having too many credit cards in your wallet, even if you don’t have a high balance on them, leaves that window of opportunity open for you to spend, spend, spend, and credit reporting and scoring agencies don’t like that. Further, if you own multiple credit cards with big balances, then it can harm your credit score even further.
Is Your Credit Report Affected by Too Many Cards?
A certain way to determine if your individual credit report and credit score is being affected by too many credit card accounts is to take a look at your credit report from the major reporting bureaus – Experian, Trans Union and Equifax. Each of these bureaus has a different way of looking at your credit, so your score will differ from bureau to bureau. Your reports will list both positive and negative occurrences in your credit history and will give you detailed information in regards to your open accounts and closed accounts. To obtain your personal credit score or FICO score, you will likely have to pay a nominal fee or sign up for credit monitoring services. Each bureau offers this.
Today’s consumer, according to FICO, has an average of nine credit cards. Your credit score can range from 350 to 850. Around 1/4th of all consumers have credit scores below 600. A low credit score can make it hard to get loans and to open lines of credit. Credit reporting bureaus determine your credit score by taking a lot of different factors into consideration. What they want to see if that you have some room to move between the balances that you owe on your cards and your available credit. The bigger this difference, the more responsible you appear. If you have maxed out your cards, or are running high balances, then this looks as if you are financially unstable.
How Your Credit Is Evaluated
Credit bureaus also look at the type of credit accounts that you have established, and the number of credit inquiries that you have made in addition to the number of accounts that you have open. For instance, loan companies may hurt your credit score in a way that having a credit card does not, but if you apply for or accept too many credit cards within a short timeframe, it can also impact your score negatively. On the other hand, having too few credit accounts can also knock points off, as can having all of your accounts be of one type. You need to have a balanced mix of credit accounts in order to score the maximum points possible.
How Many Credit Cards Should You Have?
When evaluating your credit to come up with your credit score, the credit bureaus look at a myriad of factors, including your income to debt ratio, the length of your credit history, and your past performance in paying your creditors. If you have more available credit than you should have (by having too many open accounts), your credit score can suffer. You should have no more than two or three credit cards accounts open, and you should run no more than a one-third balance on those credit cards to maximize your credit score points.
Updated: January, 15 2012