Having the right number of credit cards can really affect your credit score, but you may be wondering if you have too many or too few. The truth is that there is no perfect number of credit cards you should have or a mathematical function to help you figure out the right number for you. The most important thing to remember with credit cards is that it doesn’t matter how many you have. What will make a difference in your credit score is how you manage them.
Thanks to the recession, banks are now looking for many new cardholders, so it is much easier to be approved for a credit card now more than ever before. However, just because it may be easier to get a new credit card doesn’t mean you actually need to apply for one. You can have a great credit rating if you only have one credit card or even if you don’t have a card at all. The important factor here is how you use the credit you are given.
Those consumers who have decent credit scores usually follow three rules.
- They fully pay all of their bills on time.
- They keep a low balance on the credit cards they have.
- They only take on new credit obligations when absolutely necessary.
Those who follow these guidelines can consistently build great credit over time and don’t have to worry about their number of credit cards.
One of the factors to remember when deciding how many credit cards you need is that your credit score could suffer if you don’t have enough credit information. If you don’t provide the credit bureau with enough information, they may not feel comfortable with your ability to make payments on time, which could cause them to lower your credit score. In this way, no credit can be just as troublesome as bad credit.
On the other hand, if you have too many credit cards, the credit bureau may think that you are a risk as well. People with more credit available to them are more likely to go into debt. Therefore, their credit score may suffer the consequences. Websites such as TransUnion Canada can help you keep track of your credit score as well as provide tips and advice on how to maintain good credit.
If you want to build a credit history, but you don’t want to have credit cards, there are other options for you. Paying a mortgage or student loan will show lenders that you are responsible and capable of handling other types of loans, and that good behavior will improve your credit rating.
Be very careful when you decide to open new lines of credit. Your credit score can fall for a period of time when you apply for new accounts. So if you want to apply for a loan or some other major credit obligation sometime soon, then you probably shouldn’t be applying for credit cards as well.
To answer the question “How many credit cards does one person need?” I have researched articles written by many experts, and they all seem to say the same thing. Three to five credit cards is generally acceptable because this number of accounts will give the credit bureau enough information for a proper analysis of your credit habits, and the card holder is still able to maintain a decent level of credit card manageability. If you don’t have three, you should probably open a few accounts as long as you can use them wisely. If you have more than five, however, closing the extra accounts isn’t the best idea. The credit bureau views older accounts as more reliable sources of information, and closing some of your accounts could lower your average credit card age. Therefore, the information from your remaining credit cards could be less valuable, and closing the accounts probably won’t help improve your credit score. Instead, stop applying for new accounts and keep all of your balances very low from month to month so you can show the credit bureau that you can be responsible, even with multiple cards.
Amy Young is an author working for a financial education company. Her articles relate to various topics including business, finance, and important credit card information for consumers.