Q: Can Having Too Many Credit Cards Affect Your Credit Score?
A: Actually, it can help or hurt your credit score depending on the situation
Applying for new credit can result in hard pulls on your credit report lowering your score temporarily
Each time you apply for a new card the issuer will pull your credit. When this happens your credit report will show a credit inquiry. I recent credit inquiry is known to lower your score by a few points. If you are planning for a large purchase like a car or a house you should be extremely careful with generating any hard pulls on your credit report.
On the flip side having many credit cards can actually help your credit score in some ways.
One of the key factors in calculating a credit score is a borrowers outstanding debt compared to their credit limit. For examle, if you only have
1 credit card for $1000 dollars and during the course of the month you have a 600 balance. It will show as your cards are 60% utilized and your score may actually drop more significantly is it appears your credit is maxed out.
If you had 1 other credit card with additional $1000 credit limit then the credit bureaus will calculate your debt utilization at 30% 600 / 2000 = 30% (30 Percent Utilization is a much better number than 60% and will likely raise your credit score.
Age of credit lines affects your score:
If you are thinking of closing out an old credit card account that you don’t use? Think again, the average age of your opened accounts affects your score and the older accounts help your credit score. As long as you aren’t paying an annual fee we recommend keeping your oldest accounts in good standing. If the interest rates are high and you have cards with better benefits it is okay to keep these cards in a safe place and perhaps make 1 or 2 small purchases a year to keep them active.
Recommendation for casual credit card users
The best thing to do is to pick one or at the most two of the cards that have either the lowest balance or no balance at all. Then compare the interest rates on both cards and see which one is the best. After you have done that, then and only then look for other advantages such as rewards points for using the card, because a low interest rate is most important.
Note for travel and credit card points hackers:
If you use multiple rewards cards to always try to maximize your return on spending, be very careful not to overextend yourself and carry a balance. Try not to spend more money just because you have a new credit card, just transition all of your typical monthly spending onto a credit card whenever possible. This includes, gas, groceries, restaurants, dry cleaning, taxi/uber and any expense that takes a credit card without charging an additional fee.
Should you pay a surcharge to use a credit card? Sometimes yes if the points you will obtain are worth more than the surcharge. That is a topic for another post.
Even if you always pay your bills in full, too many cards can impact your ability to apply for new cards at certain banks. Chase bank has been enforcing the 5/24 rule in recent years. This rule means that if you have applied for and received 5 cards from ANY Bank in a 24 month period that they will deny you from opening any new cards with Chase Bank.
One way to get around this is to apply for certain Business Credit Cards that do not show up on your personal credit report. Check out the Creditshout Best Business Cards Cards for more information or the link on the top menu for Best Business Credit Cards.
But how many cards is too many?
There is no exact hard and fast rule for this question. It depends on each persons goals and spending habits. I know people with 25+ credit cards and 800+ fico scores. I also have met people who have gotten over their heads with too many credit cards.
The best advice we can give is to be disciplined and have enough credit so that the maximum balance on your credit cards is less than 30% of your overall available credit.