Can you have too many credit cards in the first place?
With all the different card issuers that offer enticing sign-up bonuses and rewards, it can be very tempting to apply for several cards. But, how many credit cards should you really have?
The truth is that there is no such thing as a magic number of credit cards that you should have. More credit can help improve your credit score, an important factor if you want to apply for loans, save on insurance rates, or get a job.
However, having several cards may also turn into a debt trap, especially if you fail in paying off your balance. Read on to know some important things when it comes to how many cards you really should have.
How Many Cards You Own Doesn’t Have a Direct Effect on Your Credit Score?
During the credit bureaus’ calculation of your credit score, the number of cards you own only makes up a small part of the overall equation. In fact, just 10% of FICO score has something to do with the specific type of credit that you are using and just a portion of this is weighted by the number of cards you own.
You can have a card or two or even 22 but what matters the most for your credit score is if you are paying your bills right on time as well as how little credit you are using, or the so-called credit utilization.
How Many Credit Cards Do Most People Own?
It is revealed that Americans own 2 to 3 cards on average. FICO revealed that people who have high credit scores or more than 800 have the tendency to have three open cards on average. It can be because of those who have higher credit scores have the ability to open more cards. Card nerds who love chasing travel rewards can more possibly open many cards at a time.
In general, your score will not go down simply because you own several cards. The only exception here is when you open then close several cards at the same to make the most out of the rewards that you earn from several cards. This can temporarily hurt your credit score. For instance, a new credit inquiry can lower your score by as much as 5 points for around 6 months.
More Cards Can Benefit Credit Utilization
It will be better for your credit score if you have more credit that you don’t use. Since every new card can increase your overall credit limit, you will be able to lower your debt to credit ratio provided you don’t incur more debt.
You can ask the credit card issuer to increase your limit instead of applying for a new card. It can also boost your credit score with no minor temporary hit that you would take if you open a new account, no to mention that you only need to manage a single card.
As long as you know that you are responsible with your expenses, you can have as many credit cards as you want depending on how comfortable you are in managing and handling them.