Credit experts are quick to point out that, while having too many credit cards can hurt your credit score, it is not necessarily the number of credit cards you carry that matters. What matters more is how you manage them and the circumstances under which you obtain them. Credit scoring is confusing, and there are several different factors to consider in determining the optimum number of cards you should carry. Understanding how your credit score is calculated is the key to determining whether you are carrying too many or too few credit cards.

The Five Credit Scoring Factors

Payment history – 35%: The biggest score factor is your payment history. Although this consists of all of your credit payments from all of your debt, your credit card payments are the biggest variable. Carrying multiple credit cards can be difficult to manage from month to month. Credit card companies are the least forgiving for late payments and are quick to report them to the credit bureaus if they are even one day late.

Debt-to-credit limit ratio – 30%: Also referred to as credit utilization, this ratio measures the outstanding debt on your credit cards in relation to available credit. The ratio hurts your score if it exceeds 30%. Having more credit cards can actually improve your score because they provide more available credit. However, it can also hurt your score if your total outstanding debt exceeds 30% of your available credit.

Length of credit history – 15%: This is where people with multiple credit cards can get into trouble. Building a responsible history of on-time payments improves your score over time. People with excellent credit scores have an average age of 11 years for all of their cards, with the oldest card being 25 years old. If your credit history is short, adding too many new cards can keeping dragging the average age of your credit accounts down, which can drag down your credit score.

New credit – 10%: Whenever you add a new credit account, it can cause your credit score to drop a few times. The first time is when the creditor makes an inquiry on your credit report. The second time is when the account is actually opened. Too many inquiries and too many new accounts opened within a short period of time are red flags for the credit bureaus because of the increased credit risk.

Type of credit – 10%: The credit bureaus like to see how you manage debt across different types of credit accounts. If all your accounts are of one type, such as credit cards, it could hurt your score. Your credit portfolio should consist of a mix of credit cards, retail accounts, installment loans, auto loans or a mortgage.

The Number of Cards Should Fit Your Circumstances

If you are a novice credit card user, focus on building a credit history with one or two cards, and on paying off your balance in full each month. If you have been using credit cards for several years, it may make sense to add a card to obtain a lower interest rate or to transfer a balance to a zero-interest card, but you need to focus on keeping your debt-to-credit ratio below 30%. Adding credit cards for specific purposes, such as a good rewards program or for obtaining better travel insurance, can also make sense as long as they are not added within a short period of time.

If you think you might have too many cards, the worst thing you can do is to start closing some accounts without considering the impact on your credit score. Closing credit cards can never help your score. If you close older credit cards, it can shorten your credit history, which can hurt your score. Your payment history on closed accounts eventually falls off your report, which can also hurt your score. It also reduces your available credit, which can hurt your debt-to-credit ratio if you have outstanding balances. It is better to leave your credit card accounts open and just put them on ice.

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