Being responsible with your credit cards is a great way to ensure you have a high credit score. However, 38.1 percent of all households carry some sort of credit card debt, so many people wonder how many is too many when it comes to opening credit card accounts.
The truth is that there is no right answer to this question. Many aspects of your credit usage impact your overall credit score, but the amount of credit cards you have isn't necessarily one of them. Rather, it's how you use your credit cards that counts. Lenders want to know that you are a responsible borrower. Here are some examples of ways you can prove that:
Debt to Credit Ratio
Sometimes people are able to increase their credit scores by getting an additional credit card because opening a new line of credit increases the amount of available credit you already have. If you don't use this credit to its fullest potential, you look like a more responsible borrower because you aren't maxing out your cards.
It's very important to note that when you apply for a new credit card, though, you get a hard inquiry on your credit report which negatively affects your score. No one knows exactly how much or how little these numbers increase or decrease your scores because everyone is different. Sometimes having your score drop a few points with the hard inquiry is worth it for the amount of new credit or credit "space" you will receive once you are approved for the new credit card.
Having seven credit cards that have been opened throughout the last 20 years is a lot different than having seven credit cards that were opened in the past 20 months. Having a long credit history shows that you have been using credit cards for a long period of time. Lenders like to see this as it shows that other lenders have trusted you with credit cards not only in recent history, but in the past few years, too.
On Time Payments
Making your payments on time every time is the very best thing you can do to achieve and maintain a high credit score. So, even if you have 20 credit cards, if you make your payments on time consistently, you will likely have a higher credit score than someone who has only one card but is late on their payments all the time. Most people don't realize that your credit payment history makes up 35 percent of your credit score, so it is one of the most important parts of you score and one that has the largest impact on your actual credit score number that lenders use to determine your credit eligibility.
Ultimately, the credit bureaus do not factor in the actual amount of credit cards you have when it comes to your credit score. What they do calculate is how you actually handle your credit cards, if you pay them on time, how much of your available credit you're using, and how long you've had your accounts.