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 is the highest achievable FICO score?

    Your FICO score is used by creditors to determine the overall credit risk of any individual consumer. This score is calculated ... Read Full Answer >>
  2. How can you pay your Walmart credit card?

    Holders of Walmart credit cards can make payments on their balances due by mail, online or at Walmart and Sam's Club stores. ... Read Full Answer >>
  3. How many free credit reports can you get per year?

    Individuals with valid Social Security numbers are permitted to receive up to three credit reports every 12 months rather ... Read Full Answer >>
  4. Is Apple Pay safe and free?

    Apple Pay is a mobile payment system created by Apple to reduce the number of times shoppers and buyers have to pay for goods ... Read Full Answer >>
  5. Can you use your Walmart credit card at Sam's Club?

    Consumers can use their Walmart credit cards to shop at Sam's Club. However, they cannot use their Walmart credit cards when ... Read Full Answer >>
  6. How can you cancel your Walmart credit card?

    Walmart offers two types of credit cards: the Walmart MasterCard and the Walmart credit card. How to Close Your Walmart Credit ... Read Full Answer >>
Related Articles
  1. Credit & Loans

    Top Places To Get A Free Credit Score Or Report

    When's the last time you checked your credit report? With all the hacking out there, don't wait for the car dealer to find problems when you need a loan.
  2. Credit & Loans

    Applying For Credit Cards Affects Your Credit Score

    if you follow these simple rules, you should be able to refresh your plastic without causing a big hit to your score.
  3. Credit & Loans

    How FICO Scores Are Calculated

    Lenders look at this to determine your credit risk. We explain what it is and how it's figured out.
  4. Home & Auto

    Don't Be the Victim of Auto Loan Rip-Offs

    Subprime auto loans – and 60-day delinquencies – are up. These 4 signs of predatory auto loans can tip you off before you're caught in one.
  5. Credit & Loans

    A FICO-free Loan? See SoFi's Super Bowl Ad

    Non-bank lender SoFi will air its first TV ad during Super Bowl 50. Here's how it's challenging big banks by providing an alternative approach to loans.
  6. Credit & Loans

    10 Reasons To Use Your Credit Card

    There are several benefits to paying with credit instead of debit, if you use a credit card responsibly.
  7. Credit & Loans

    5 Extreme Ways To Raise Your Credit Score

    Desperate to rebuild your credit score because you can’t obtain a loan with a decent interest rate? Here are some extreme options to try.
  8. Personal Finance

    The Top 5 Personal Finance Experts to Follow in 2016

    Here is a look at five money and investing experts who can help you reach your financial goals for 2016.
  9. Economics

    What is a Trade Credit?

    Trade credit means that a customer purchases goods from a seller who allows the purchaser to pay for those goods at a later time.
  10. 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.
RELATED TERMS
  1. FICO Score

    A type of credit score that makes up a substantial portion of ...
  2. Credit Rating

    An assessment of the creditworthiness of a borrower in general ...
  3. Transferable Points Programs (UAL)

    With transferable points programs, customers earn points by using ...
  4. Luhn Algorithm

    An algorithm used to validate a credit card number.
  5. Roll Rate

    The percentage of credit card users who become increasingly delinquent ...
  6. Truncation

    The requirement mandated by the FTC for merchants to shorten ...
Trading Center