A:

Having several credit cards, in and of itself, does not hurt your credit score. What matters are the specifics of those cards and how you have used them.

Your credit score is roughly based on five factors, some of which are weighted more heavily than others:

  • Types of credit in use: 10%
  • New credit: 10%
  • Length of credit history: 15%
  • Amounts owed: 30%
  • Payment history: 35%

If the only type of credit you have is in the form of credit cards, this situation can lower your credit score. However, that’s no reason to run out and get a mortgage or an auto loan. Limit your loans to those you actually need.

Having several credit cards could hurt your credit score if all of them are relatively new. Opening several accounts in a short time can make you look like a risky borrower who suddenly wants access to lots of new credit. Opening several new cards all at once would also lower your average account age, which could lower your score.

If your credit card balances are high relative to your credit line, your credit score will suffer. The credit scoring formula treats borrowers more favorably when they use 20% or less of their available credit. It doesn’t matter if you pay your balance in full and on time every month; spending close to your credit limit doesn’t go over well with the credit scoring formulas. But having several credit cards can actually help you here. If you have much more available credit than you actually need to use, your credit utilization ratio is more likely to be below 20%.

If you have paid any of your credit card bills late by 30 days or more, your score will take a hit. Making your payments on time is one of the best ways to boost your credit score. However, one or two late payments won’t hurt your score too much if your on-time payment history is otherwise solid.

The Fair Isaac Corporation (FICO), the company that works with Equifax, Experian and TransUnion to provide your credit scores, cautions that it is difficult to measure how a single factor impacts your credit score since your score is based on all the information in your credit report taken as a whole. FICO also points out that lenders often consider factors beyond your credit score, such as income and employment, in determining whether to extend credit.

RELATED FAQS
  1. What are the biggest factors that can affect my credit score?

    A credit score is a numeric expression that helps lenders estimate the risk of extending credit or loaning money to people. ... Read Answer >>
  2. Does a free credit report show your credit score?

    Find out how you can obtain your credit score, and find out whether your score is included in your free annual credit reports. Read Answer >>
  3. Will credit card inactivity affect my credit score?

    Whether your credit score will be affected by inactivity depends on how you define "inactivity". Your credit report does ... Read Answer >>
  4. Does a cash advance hurt my credit score?

    Find out if a cash advance will hurt your credit score and how your credit report and requests for new credit can be affected ... Read Answer >>
  5. How do balance transfers affect my credit score?

    Learn the ways a balance transfer can negatively and positively affect your credit so you can pay off debt while maintaining ... Read Answer >>
  6. Is it possible to have a credit limit that's too high?

    Avoid these pitfalls when working with high credit limits, and learn how to increase your credit score by increasing your ... Read Answer >>
Related Articles
  1. Investing

    How to Raise Your Credit Score Quickly

    Here are the best tips for raising your credit score quickly.
  2. Retirement

    6 Methods to Maintain a Healthy Credit Score During Retirement

    Learn how to improve your credit score during retirement. Your credit score still matters in retirement, and these tips can give it a boost.
  3. Credit & Loans

    How Bad Is My Credit Score?

    You've seen the number, but what does it mean? Here's how to assess your credit score and get to a better place if needed.
  4. Credit & Loans

    10 Ways To Improve Your Credit Report

    A good credit rating can make your life simpler in almost every way. Here's how to build up yours – and repair it if times get tough.
  5. Credit & Loans

    What Do Credit Score Ranges Mean?

    Take a closer look at what credit scores in each range mean for your financial future.
  6. Credit & Loans

    9 Ways To Improve Your Credit Score Today

    When it comes to finances, there are a number of goals that you might have established, such as saving money, paying down debt or new investments.
  7. Credit & Loans

    Getting Your Credit Score from a Bank

    That all-important, once-secret number is now easy to obtain from financial institutions and credit card companies.
  8. Credit & Loans

    5 Common Misconceptions About Your Credit Report

    Your credit report is one of the most important factors in determining your ability to get loans and new credit and has a major influence on your rates.
  9. Retirement

    7 Ways to Use a Strong Credit Score During Retirement

    Find out why it is important to maintain a good credit in retirement. Learn seven reasons not to leave your credit score behind when you retire.
  10. Credit & Loans

    Your Credit Score: More Important Than You Know

    Credit scores affect key aspects of your personal and professional life. Knowing your score and managing your credit input can make a big difference.
RELATED TERMS
  1. Credit Mix

    The types of accounts that make up a consumer’s credit report. ...
  2. Good Credit

    A qualification of an individual's credit history that indicates ...
  3. Credit Scoring

    A statistical analysis performed by lenders and financial institutions ...
  4. FICO Score

    A type of credit score that makes up a substantial portion of ...
  5. FAKO Score

    A derogatory term for a credit score that is not one of the FICO ...
  6. Credit Rating

    An assessment of the creditworthiness of a borrower in general ...
Trading Center