How does the number of credit cards affect my credit score?
Determining the right number of credit cards can be confusing. Some people obtain lots of cards to increase their available credit. Others may have one card to keep their balance due low. Both of these credit-building strategies have benefits and drawbacks consumers may want to consider.
Credit reporting agencies determine your credit utilization score, otherwise known as a credit rating. This score is based on available credit and the amount of debt you hold on your credit cards. To improve your credit utilization score, some credit should remain available while you regularly pay down balances.
It can help your credit score to have two to three credit cards, in addition to other sources of credit, that you maintain in good standing.
How do new credit cards affect my credit score?
One mistake consumers make is acquiring new credit cards too quickly. Each time you open a new line of credit, your credit score may drop by about five points. Since each new card is a new line of credit, new credit cards will shorten the length of time of your reported credit history. Opening several new cards in a short period of time can reduce your rating.
Once you open a new card, however, it won’t take long for your credit rating to improve if you use it responsibly and pay the balance down each month. Because the rating factors how long you have held the credit line, the impact of new cards will be offset over time by a longer positive reporting history.
One strategy to improve your credit history is to regularly check your credit score and remove inaccuracies by making a Credit Card Inquiry. Since each agency operates independently and calculates the credit score differently, it can help to check with the different agencies to get the best idea of your overall score. Obtaining your history is free, and it can also help you to monitor fraudulent or erroneous charges.
How many credit cards can I keep open?
There is no right number for everyone. It will vary depending on a multitude of factors, including a family's financial situation and the card’s debt limit. Two or three credit cards is a sensible amount for most people. More than three, and it can become difficult to manage balances without missing payments or accumulating too much debt if each card is not paid in full every month.
According to a 2021 Experian State of Credit report, half of all Americans had at least two credit cards, with 13% having at least five cards. The credit reporting agency found that Gen Z Americans had 1.9 cards as of 2020, while Baby Boomers had 4.6. On average, Americans carry more than $5,000 in debt per card with an average debt limit of just over $30,000 per person.
The way to make credit cards work for you is to maintain a good credit utilization score. The best way to improve your score is by maintaining a good credit line-to-debt ratio and avoiding using the maximum amount of credit. Paying balances on time and keeping cards open for a long time can improve your credit score.
Which cards are the best to close?
While it may be tempting to close older credit cards, the reality is that older credit cards can actually improve your score by extending your credit history. Instead, you should use these cards sparingly while paying off the balance to improve your overall credit rating.
Consumers who have a lot of credit cards might consider closing one that has a low limit or high-interest rate. These cards are less useful and may not offer as many benefits. You can make a Request to Cancel a Credit Card. This might also be a good opportunity to investigate whether transferring balances to a new card with higher limits and lower rates is appropriate.
There are a number of ways you can manage your credit cards to dispute charges or cancel cards that no longer provide a benefit. Credit card debt is one of the most mismanaged debts, but it doesn’t have to be that way. If you have more questions about managing your credit card debt, reach out to a Rocket Lawyer network attorney for affordable legal advice.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.
FAQs
Credit bureaus suggest that five or more accounts — which can be a mix of cards and loans — is a reasonable number to build toward over time. Having very few accounts can make it hard for scoring models to render a score for you.
How many credit cards are considered too many? ›
Key takeaways
There is no right number of credit cards — it depends on how many you can manage. Having multiple credit cards helps reduce your utilization rate and provides lenders with more information to better gauge your creditworthiness.
Is 12 credit cards too many? ›
So, while there is no absolute number that is considered too many, it's best to only apply for and carry the cards that you need and can justify using based on your credit score, ability to pay balances, and rewards aspirations.
Is it bad to have lots of credit cards? ›
Opening multiple card accounts in a short period of time can actually hurt your credit score and can also jeopardize larger financial goals like getting a low mortgage rate when buying a house.
Is it bad to have too many credit cards with zero balance? ›
Having too many cards with a zero balance will not improve your credit score. In fact, it can actually hurt it. Credit agencies look for diversity in accounts, such as a mix of revolving and installment loans, to assess risk.
Is 7 credit cards too many? ›
Too many credit cards for most people could be six or more, given that the average American has a total of five credit cards. Everyone should have at least one credit card for credit-building purposes, even if they don't use it to make purchases, but the exact number of cards you should have differs by person.
Does cancelling a credit card hurt your credit? ›
Closing a credit card could lower your credit score. That's because it could lead to a higher credit utilization ratio, reduce the average age of your accounts and hurt your credit mix. Before closing a credit card, it's wise to consider these factors and the potential impact on your credit score.
What is the 3 12 rule for credit cards? ›
Bank of America's 3/12 or 7/12 rule
If you do NOT have a deposit account with Bank of America, your credit card application will be denied if you have opened three new cards in the past 12 months, based on what's visible on your credit report.
Is 10 credit cards a lot? ›
How many credit cards is too many or too few? Credit scoring formulas don't punish you for having too many credit accounts, but you can have too few. Credit bureaus suggest that five or more accounts — which can be a mix of cards and loans — is a reasonable number to build toward over time.
Is 20 credit cards bad? ›
A lot of people believe the number of credit cards you open has a big influence on your credit scores. While it's smart to worry about the actions that impact your credit, here's the truth: There's no perfect number of credit cards when it comes to your credit score.
What is the 5/24 rule? Many card issuers have criteria for who can qualify for new accounts, but Chase is perhaps the most strict. Chase's 5/24 rule means that you can't be approved for most Chase cards if you've opened five or more personal credit cards (from any card issuer) within the past 24 months.
How many credit cards should I have to get an 850? ›
Total accounts: You need 21+ accounts to score "Excellent." If you have 20 cards and low utilization, you're seen as more responsible to the credit agencies.
Is it better to close a credit card or leave it open with a zero balance? ›
In general, it's better to leave your credit cards open with a zero balance instead of canceling them. This is true even if they aren't being used as open credit cards allow you to maintain a lower overall credit utilization ratio and will allow your credit history to stay on your report for longer.
How many credit cards can you have before it hurts your credit? ›
It's generally recommended that you have two to three credit card accounts at a time, in addition to other types of credit. Remember that your total available credit and your debt to credit ratio can impact your credit scores. If you have more than three credit cards, it may be hard to keep track of monthly payments.
Is it better to pay off one credit card or reduce the balance on two? ›
Interest Rates: Compare the interest rates on both credit cards. If one card has a significantly higher interest rate, it may be more beneficial to focus on paying off that card first. By eliminating the high-interest debt, you can save money on interest payments in the long run.
How many credit cards does the average American have? ›
How many credit cards does the average person have? According to the latest figures from Experian, the average American has 3.84 credit cards with an average credit limit of $30,365. And their credit journey usually begins early, with the average Gen Z consumer having 2.1 credit cards.
How many credit cards do the average person have? ›
How many credit cards does the average person have? According to the latest figures from Experian, the average American has 3.84 credit cards with an average credit limit of $30,365.
Is it normal to have 4 credit cards? ›
While Experian found that the average American has four cards, you may be better off with fewer or more — depending on how you use them. If you already have a few credit cards and are interested in opening another, you may wonder if there's an ideal number of cards to have.
