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How many credit cards should you have?

How many credit cards should you have?

September 7, 2016
many credit cards
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How many credit cards is too many? Is there such a thing as too many credit cards? Some people ask themselves questions such as these. A credit card can be a very useful financial tool, especially in the hands of a smart, responsible user. And a lot of credit cards come with wonderful rewards and discounts. That’s why many people wonder how many credit card accounts they can open. However, the question here is not how many credit cards you can have, but how many credit cards you should have.

Unfortunately, there’s no easy answer to this question. It all depends on you. Having a credit card can help you build credit score, which can in turn help you out if you want to get a new loan or a mortgage. There are a lot of things that impact your overall score, but the number of cards that you have isn’t necessarily one of them. What lenders want to know is if you’re a responsible borrower, so that you can pay them back for what you owe. Here’s how the number of credit cards that you own can prove that:

1. Credit history

Credit history is really important when it comes to your credit score. You may have heard the saying: “Old credit is good credit.” That’s because owning 10 credit cards in the past 20 years is much more important than opening 10 cards in the past 12 months. Your credit history lets your lender know what kind of credit card user you are. If you’ve been using credit cards for a long period of time, then it means that other lenders have trusted you enough to give you those credit cards. And that you’ve also been a responsible user during this period.

2. Debt to credit ratio

Another way to improve your credit score is by adding another credit card. But how can getting even more credit help? It does, because opening a new line of credit increases the amount of available credit you already have. And if you don’t use this credit to its full potential, you’ll end up looking like a responsible borrower, just because you’re not maxing out your cards.

However, you still need to be aware of one thing. When you apply for a new card, you get a hard inquiry on your credit report. And this will affect your score. But having your score drop by a few points might be worth it if you can get the new card.

3. Making payments on time

I kept the best for last, because this is the best thing you can do to have a high credit score. It doesn’t matter how many credit cards you have, if you pay off all of them on time. Your payment history makes up about 35 percent of your credit score. That’s why it’s so important to always take care of it. So, if you want to get a new credit card, think about the ones you have first. Can you handle the new payments? If you can, then there’s no reason not to get the new card.

 

Thomas Hookton

Thomas Hookton is a finance journalist, history buff and science fiction connoisseur. Hit him up via email.

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