Managing 10 cards or more? 4 rules
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Dear Opening Credits,
I have done a good job of paying off all my credit cards, of which I have 10 total. The new Capital One card BuyPowerCard is very enticing, and I would like to apply. My credit score is at 686. I have little debt except my student loan debt which is around $70,000. Will it be a bad thing to apply for this card although I pay my cards off each month (most of the time)? Any balance I do carry is very low compared to my credit limit. -- Jamie
I assume that you're in the market for a car? The Capital One card you mention is designed for people wanting to earn points redeemable for a Chevrolet, Buick, GMC or Cadillac, which is great, unless you're not planning to buy a new vehicle. Then it becomes just another line of credit.
Right now you have far more credit cards than most people in the U.S. According to a 2014 Gallup survey, the average number of cards per adult is 2.6. That includes those who have no cards, but even among all cardholders, the average is just under four. For the record, the most I've seen one person own is 36.
That said, who cares about being "average"? Not me. If you want to have 100 cards and will use them to your advantage, I say go for it. So let's talk what it really means to wield these accounts well. It breaks down to four basic rules:
1. Never use a line of credit to supplement income. If you can charge with any and all of your credit cards and pay the balances to zero within a month or two, you're doing it right. That means your income, not your credit, supports your lifestyle. Too many people turn to plastic to pay for things that fall outside the limitations of their paychecks.
2. Always pay accounts on time. You have a lot of due dates to keep track of, but if you can make payments by or before them, you're building a terrific credit history. If you don't or can't, it will suffer. Simple as that.
3. Monitor statements regularly. It is your responsibility as a cardholder to review your own statements. With 10 of them (and counting?) that's a considerable amount of work. It does need to be done, though, because it's the only way you can mitigate potential problems early. If you've mistakenly been billed twice for the same purchase or someone has used your card fraudulently, the bank may not catch it. And if you don't, you'll end up paying for those errors.
4. Organize and maximize your points. Surely some of your accounts come with rewards programs. Being aware of how to rack up the most points up for each will ensure that you maximize their benefits, yet doing so can get mighty confusing. Deals and special offers change all the time! (To be candid, I have trouble staying abreast of the two rewards cards I have.) The best way is to have a system in place, such as a spreadsheet, scheduled weekly review of the issuers' websites or smartphone apps designed to help you organize your points.
As for your current credit score, it's in the "fair" range. That puts you in the middle -- better than bad to poor, yet not good to excellent. Because you've been keeping the card balances to nil or low, I suspect your large student loan debt is dragging the numbers down and perhaps the number of cards you are carrying.
FICO, the most common scoring system, ranks credit utilization as one of the most important factors. Credit utilization is the amount of debt you are carrying compared to the amount of credit you have been extended. Although student and other installment loans are calculated into the scores less severely than revolving debt, it is still a sum you owe and will have a negative impact on the numbers. As you delete the balance and continue to follow the above rules, your scores should increase. And even if your card balances are near zero, FICO may not look favorably upon the amount of credit you have at your fingertips. A lender may see that as risky.
So should you try for that cool new BuyPower card? Not until you bring your scores up. Looks like Capital One expects applicants to possess digits in the excellent range -- around 750 and above.
See related: How many credit cards is too many
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