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If you’ve ever ordered your free annual credit reports, you may have been surprised by some of the accounts listed there. You may find that credit card you opened to get a 10% discount when you bought a new set of tires. Or the account from the home improvement store taken out the year you remodeled the bathroom. And that first credit card you opened years ago and have barely used since. They may all be there. The question is, at what point does having all those accounts listed on your credit reports hurt your credit scores? In other words, how many credit cards is too many? The short answer: Credit scoring models care more about how you’re using your credit cards and less about how many you have on file. So there’s really no tipping point or sweet spot when it comes to how much plastic is in your wallet. In fact, having a lot of credit cards can boost your credit score — so long as you’re making all of your payments and keeping your balances low.
That’s not to say there’s no such thing as having too many cards. Scoring models aside, if you have so many credit cards that you’re missing payments or you’re bumping up against all of your credit limits, there’s a good chance you’ve overextended yourself, which will be reflected in your scores. Plus, applying for too many credit cards in a short period of time can hurt your credit. That’s because each application can generate a hard inquiry on your credit report, which can ding your scores. Moreover, lenders often view too many new credit accounts in a short period of time as a sign of financial woes to come and could wind up denying your latest application.
Of course, the best way to learn how your credit cards impact your credit score is to check one of your scores. You can get a two of your credit scores at Credit.com. You’ll also get a helpful breakdown of the factors impacting your score and an action plan for your credit.
As we mentioned earlier, when used responsibly, multiple credit cards may have a positive impact on your credit scores. Old credit card accounts, for instance, can bolster the age of your accounts, even if you’re not regularly using them. And credit cards with zero balances can help your credit utilization, which involves how much debt you’re carrying versus your total credit limit(s). Here’s more on how those factors work.
One of the factors affecting your credit scores is the age of your accounts. Here, most scoring models will look at factors such as the age of the oldest account, the average age of your accounts and how recently you’ve opened a new account. This is one case when older is definitely better. You can earn more points for a long-established credit history, and those accounts you opened many years ago can help, even if you aren’t using them anymore.
Beware, though: An account may be deleted from your credit reports after it has been closed or after a period of inactivity. Experian, for example, deletes closed accounts after 10 years. For that reason, you may want to consider using your oldest credit card from time to time to keep it active and open. That’s especially true if you don’t have a lot of older accounts and losing that reference would significantly shorten the age of your credit history.
Conversely, opening up too many new accounts in a short time period can also lower the average age of your accounts, so it pays to be mindful of how many cards you’re adding to your arsenal.
Most scoring models compare your available limits on your revolving accounts, such as credit cards, with the balances you carry on them. This is called “utilization.” If you are using more than roughly 10% to 30% of your available credit on each of your credit cards – or all of them in total – you may not score as well for this factor as you would if your balances were lower. If you don’t carry balances on all or any of your cards, then the available credit helps your utilization because it gives you more available credit.
At the same time, however, having a lot of accounts with balances may hurt your credit scores. So if you are juggling a lot of high credit card balances, try to find a way to pay down your debt. If you do, you’ll save money on interest and you may see your credit scores go up as well.
No, as we indicated earlier, if anything, having low-to-no balance is a good thing. One of the biggest misconceptions regarding credit scores is that you have to carry a balance on your credit cards to score big points. In actuality, you’re generally best served paying off purchases by the end of the month. That way, you’re debt levels remain low — and you don’t wind up paying interest.
Remember, having multiple credit cards can boost your score, but it can also hurt you, if you forget to make a payment or all that available credit leads you to spend more than you can actually afford. As such, again, it’s a good idea to be smart about fattening your wallet.
Something else to consider: Credit scores reward folks who demonstrate they’re able to responsibly manage different kinds of accounts. In other words, someone who already has a lot of revolving credit accounts (like a credit card) would benefit from having an installment loan, like an auto loan or mortgage, on the books. That’s not to say you should add that type of financing when you don’t actually need it. It’s just to point out: The best way to build credit is to add a mix of credit accounts organically over-time — and to manage all of those accounts responsibly.
Again, there is no specific number of cards that is too many. If you focus on paying your cards on time and keeping balances low, you should be fine.
Jeanine Skowronski contributed to the reporting of this article.
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