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 (and amounts available): 30%
  • Payment history: 35%

As you can see, your credit report includes current balance(s), credit limit(s) and whether you've made payments to your credit card company on time; 80% of your credit score is derived from these three factors. It does not include information on frequency of credit card use in any given month. If you maintain a low balance relative to your limit and you make payments on time, either because you're slowly paying down an existing balance or you're paying off your charges monthly, your credit score will remain intact. In fact, people with the best credit scores have done little more than repeat this pattern over a long period of time.

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.

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