Consumers today face many choices when it comes to credit cards. Having one to three credit cards can be good for your credit score. Responsible ownership of these cards shows lenders that you are a good steward of your credit. However, having too many credit cards can have negative consequences for your credit score placing your ability to finance a home and make larger credit purchases at risk.
How many credit cards are too many?
Let’s find out.
How Many Credit Cards Should You Have?
Unfortunately, there’s no magic number that works for every person. Each person is unique and each situation is different. Having at least one credit card – and using it responsibly – allows you to establish a strong credit history. It also affords you the convenience, security, and other benefits having a credit card offers.
Some people justify the need for multiple cards to accommodate a variety of needs but it should all come down to whether or not your monthly discretionary spending budget can accommodate more than one card.
Different Cards, Different Benefits
It’s quite possible that you want to take advantage of the benefits that different cards offer such as hotel rewards, airline miles, and even cashback rewards. You may even have one credit card devoted to gas purchases each month.
That is perfectly fine if you keep the number of rewards cards you have limited and are able to keep the balances on these cards low. Especially if you’re working toward credit score improvement for major purchases down the road.
How Many Are Too Many?
As stated earlier, there are no pre-set rules about how many cards are too many. However, if you can’t afford to pay your bills, even one or two credit cards can be too many. A few things you need to know about getting new credit cards.
- A new credit card can reduce your credit utilization ratio, which can result in credit score improvement.
- Too much credit card debt, i.e. high credit utilization scores, can have a negative impact on your credit score. Keep your balances paid off or maintain a total credit utilization score of less than 30 percent for a healthier credit score.
- Keep in mind your income. While not all lenders rely heavily on debt-to-income ratios, most mortgage lenders do and if you’re hoping to purchase a home in the future a high debt-to-income margin can derail those plans.
- Applying for multiple new credit cards in a relatively short period of time can also negatively impact your credit score. It certainly raises red flags for credit card companies and other lenders.
The bottom line is that you should never have more credit cards than you can reasonably manage and repay every month.
What Having Too Many Credit Cards Means for Your Credit Score?
Your credit score determines whether you can buy a car, purchase a home, rent a home, and even qualify for some jobs. Surprisingly enough, it even impacts how much you pay for your auto insurance. With so many factors influencing your credit score, many of them involving credit card usage, spending, and management, it’s important to think about the number of credit cards you have now and how they will impact your future credit opportunities.
Final Thoughts
There are many benefits available to consumers, like you, for having multiple credit cards. Those benefits only exist if you manage them responsibly. Make sure your credit cards are working for you and not against you by staying on top of the offers so that you can maximize them without putting your credit at risk; utilizing only 30 percent or less of the credit available to you, and staying on top of payment due dates to keep your balances low and your payments on-time. Now that you have your credit card situation under control, contact Mid America Mortgage to manage your mortgage needs!
