Building and maintaining a solid credit score involves more than checking your credit reports on a regular basis. You also want to have the right mix of credit accounts, including revolving accounts like credit cards.
But figuring out how many credit cards you should have can take careful calculating; it’s not something that’s always mentioned with traditional credit card tips. Couple that with the fact that everyone’s financial situation is unique, and figuring out the answer can take a bit more research than you might anticipate.
Fortunately, there are some general guidelines that can get you moving in the right direction. If you’re wondering, “How many credit cards should I have?” here’s what you need to know.
What’s the Right Number of Cards?
Technically, there isn’t a specific number of credit cards you have to have to raise your credit score. Some people do well with just one. Others may prefer three or four, particularly if they come with different benefits, such as travel rewards, free credit monitoring or cash back.
Generally, the right number is based on what you can reasonably manage. You want to ensure that the total amount of your payments is something you can handle, even if you’ve maxed out every card. If you struggle to keep up with payments on two cards, then one is your best bet. If you can stay on top of more than that, sticking with two or three can prevent you from becoming overwhelmed while tracking your debts.
Is It Good to Have Multiple Credit Cards?
Having multiple credit cards isn’t inherently a good or bad idea. Instead, it’s all about what you can reasonably manage. Additionally, you’ll want to factor in the impact on your credit.
In a broad sense, lenders prefer borrowers who show they can use a mix of credit products responsibly. This usually means having a history of handling revolving and non-revolving credit well. For example, demonstrating a habit of making consistent on-time payments on loans and credit cards may make you a more attractive borrower. Also, different credit cards can have unique perks. By having more than one, you can tap into a range of programs, which may collectively address a wider range of financial needs for you.
However, having multiple cards isn’t a wise idea if you have trouble with debt management. When you have more accounts, you have more to juggle. These management complications could increase your risk of missing payments or cause you to overspend to a larger degree because you’ll have several cards you can potentially max out.
How Multiple Credit Cards Can Impact Your Score
Having multiple credit cards impacts your credit score in several ways. It also factors into your overall creditworthiness.
First, getting a second or third card gives you access to more credit, which can boost your score by increasing your available credit limit. In some cases, though, that works against you. Lenders factor in how much borrowing power you currently have when deciding whether to extend you more credit. Even if you don’t use your entire credit line, you have the ability to, and lenders may consider how that could impact your ability to repay them if you maxed out everything else.
Multiple credit cards also impact your credit utilization ratio. That figure totals up the sum of your available credit lines and compares it to the balances you carry on them. It can account for 30% of your FICO score — with lower utilization rates leading to a higher score and higher utilization lowering your score. If you’re a responsible borrower, adding a new credit card could reduce your utilization, resulting in a credit score bump. If you max out the new card, however your utilization goes up and can cause your score to fall.
When you open a new credit card, there’s typically a hard pull on your credit report. While one or two hard pulls don’t usually impact your score, more than that can lower your score.
Additionally, opening a new card reduces the average age of your accounts. Lenders prefer borrowers with long-term relationships with their creditors. That usually means they at least meet the terms and conditions relating to the cards. When your average shrinks, lenders may be wary of extending you additional credit until you show you can use your most recent additions responsibly.
The Impact of Spending Habits and Credit Card Use
When deciding whether you should get another credit card, you’ll want to factor in your spending habits and credit card use, too. While adding a credit card may impact your score positively, at first particularly if your utilization was high without the new card, it can lead to trouble if you start carrying a big balance on the new card, too.
In some cases, credit cards are a source of temptation. If in the past you’ve found it difficult to maintain a low balance you’re comfortable with, it’s best to avoid getting new credit cards. That allows you to avoid a potential motivator for overspending until you develop new habits.
Additionally, when you’re juggling balances on several credit cards, the payments become more complicated to manage. Along with introducing new due dates you’ll need to track, you could generate multiple balances with high monthly payments. This could make missing a due date easier — another factor that can lower your score. Plus, this could allow the payments to become unaffordable, putting you at risk of breaking your budget or missing a payment because you don’t have the funds.
Can You Have Too Many Credit Cards?
Technically, you can have too many credit cards. Again, there isn’t a set number. Instead, “having too many” really means opening enough cards that you can’t manage them responsibly or they prevent you from accessing other credit you need because lenders see your high limits as too risky.
If you’re concerned about your ability to manage a new credit card or are trying to manage debts you already have, don’t add another. Similarly, if your total credit lines will get questionably high, it’s best to avoid more cards.
Ultimately, keeping no more than two or three is usually wise, as that’s manageable for the average borrower. However, if you only feel comfortable with one, that’s okay, too. In the end, effective management is the most important part of the equation.