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How many cards is too many?

By

Speaking of Credit
Speaking of Credit columnist Barry Paperno
Barry Paperno is a freelance writer and credit scoring expert with decades of consumer credit industry experience, serving as consumer affairs manager for FICO (formerly Fair Isaac Corp.) and consumer operations manager for Experian. He writes "Speaking of Credit," a weekly reader Q&A column about credit scoring and rebuilding credit, for CreditCards.com. His writings about credit scoring have appeared in The Huffington Post, MSN Money, CBS Money Watch and other consumer finance websites.
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Question

Dear Speaking of Credit,
Does having too many credit cards adversely affect one’s credit score? I understand that the credit score also depends on the total number of accounts. I already have six credit cards, out of which I got five within the last two years, and I just applied for a seventh one. Although I did get approved, now I’m thinking that maybe it was not a very good idea to apply in the first place. So is seven credit cards way too many? And is it a bad thing to have too many credit cards? – Ayesha

Answer

Dear Ayesha,
Not only can having too many credit cards adversely affect your credit score, having too few cards can also hurt your score. And what’s even more confusing, the number of cards the score may consider as being too many this month could be too few next month.

What’s a consumer who’s simply trying to protect her good credit score to do? No. 1, don’t worry. I’ll tell you why.

While you haven’t told us your credit score, it can be assumed that your score has remained at least high enough to repeatedly generate new account approvals, despite the likelihood that those new card openings aren’t doing a lot to help your score. More than anything, the fact that you have opened six new cards in two years tells me is that you must be faithfully making your payments on time each month and that you are in full control of your credit card usage. Just these two practices alone are enough to ensure a good score, regardless of any other lesser factors, such as the number of new account openings and cards.

To answer your question about whether seven cards is too many, the best information I can give you comes from the FICO high achiever statistics, an analysis by the credit scoring giant into the habits and attributes of approximately 50 million U.S. consumers who score above 785. Base FICO scores range from 300 to 850.

Using these statistics I have some good news for you: On average, FICO high achievers tend to have (drum roll, please) seven cards! This includes open and closed cards, and accounts carrying and not carrying balances. Additionally, these high achievers have an average of four credit cards or loans with balances, which tells us that, while it’s good to have seven cards, you should only owe on up to four – not all – of them.

Unfortunately, one area where your experiences don’t coincide with those of the high achievers, but provides some insight into an aspect of your credit profile that can use some improvement, is in a set of statistics indicating that FICO high achievers have a lengthy, well-established, credit history and seldom open new accounts. On average, their oldest credit account was opened 25 years ago with their most recent credit account averaging 28 months old. Overall, their average credit account is 11 years old.

This is where the message should be loud and clear that it’s time to give that accelerated card opening strategy of the past two years a rest. Simply maintain and manage the cards you have, while continuing to do what you’ve been doing – paying on time each month and keeping a low credit utilization percentage (individual and combined card balance/limit percentage) on any cards with balances.

As for your follow-up question of whether having too many cards is a bad thing, it’s important to understand that any scoring calculations that look at how many of a particular type of account you have fall within the "types of credit" category that makes up only about 10 percent of your score. This means that, while it’s good to have the "right" number of cards, this number weighs very little within your score when compared to the factors comprising the three most important categories – payment history (35 percent), credit utilization (30 percent) and length of credit history (15 percent). Those latter three together amount to 80 percent of your score. And, as we’ve discussed, you appear to be managing the first two quite well, and now have a plan to improve the third.

I hope you’ll come away from this discussion feeling good about the way you’ve been managing your credit, not only from owning the same number of cards as the high achievers, but more importantly, from being able to achieve a score high enough to gain multiple card approvals within just the past two years. Now, going forward, if you can resist the temptation to apply for or accept any offers for additional cards during the next two years, your "length of time since your most recent account opening" statistic will fall right in line with the high achiever number of 28 months – and you’ll be well on your way to your own high achiever credit score. Keep up the good work! 

See related: Closing 50 cards without damaging credit score, Best way to track all those reward points?, Even with high credit score, some card applicants rejected

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Updated: April 27, 2016


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