When was the last time you took a look at your free credit report? Were you surprised to see how many credit cards you had open in your name? How often have you been lured at the cash register to sign up for a store credit card to save 10-15% on the spot?
All of these cards are probably still sitting on your credit report, open and available for use, and you may not even remember that you have them all. A big question for many is, how many credit cards should you have? There is not a hard and fast answer to that, so let’s go over some of the basics to help you decide which ones to keep and which ones to ditch to clean up your credit report.
Luckily, for the most part, having a lot of credit cards does not hurt your credit score. This is assuming that most or all of them have a zero balance. You also don’t want to keep a lot of cards that have annual fees, especially if you are not using the card. In order to “clean house” you have to know everything you have, so get out your credit report and get ready to take a look at each card you have.
How Old Are the Cards?
One of the first, and most important questions to ask about each card is, how long have I had this card? If you have had a card for many years, and your account is in good standing, then you probably want to keep it open. Length of credit history is a big factor when it comes to calculating your credit score, so the longer you have a card, the more positive impact it can have on your credit score.
The one downside to this is that if your card sits dormant for too long, the credit card company, bank or store may close your card for inactivity. When this happens, the account will eventually be deleted from your credit report and then it won’t matter that you had the card and your account was in good standing for 10 years. It will be like it never happened. To avoid this, make the occasional purchase and pay it off. When you keep your oldest card on your credit report, you will see that your credit score is a little higher.
What’s Your Utilization?
This might sound like a fancy term, but utilization refers to how large of a balance you carry compared to how much credit you have available. It is a simple ratio that is used to calculate your credit score. If you are using more than 30% of the available credit, across all of your cards, your credit score will drop.
To fix this problem, slow down your spending and make a few extra payments to get things under control. Use a 0% introductory APR balance transfer card if you are paying interest, and then pay off that amount before the intro rate expires. As you pay off your balances, your credit utilization will begin to improve because you will have more available credit.
The Bottom Line
The answer to the question is that there is no solid answer when it comes to how many credit cards you should have, and how many is too many. But, pay attention to how many credit cards you have, how old they are, how often you use them, and how much balance you are carrying. When you can understand all of these factors and how they affect your credit score, you can have just the right amount of credit cards for you!