Do you have too Many Credit Cards?
If you are going through your wallet and see that every slot has a credit card you may wonder if you have too many. You might also be thinking about opening new credit accounts and you want to be sure that another credit card wont effect your credit. So do you have too many credit cards?
High Debt to Income Ratio
When lenders look at your loan application the available credit is seen as opportunity for debt. Your debt to income ratio could be calculated as if your credit cards were completely maxed out. This will help them to determine the highest risk you would be.
If your debt to income ratio is above 37% then you should think about closing some of the unused credit card accounts like new ones that have 0 balance.
High Credit Utilization
Credit utilization, which is 30% of your credit score, will indicate how much debt you have. This is calculated by your total debt divided by your total credit. Your credit utilization should be less than 30% and lower than 10% is even better for your credit score.
The more credit cards that you have then the more temptation there is to use them. When your credit card balances increase then so will your credit utilization.
You can minimize your credit utilization by reducing the number of credit cards that you have and the balances that you have on the cards.
No Experience with other Types of Credit
A mix of credit is another credit score factor that looks at the number of credit cards. The credit score calculation looks at all types of accounts that you have in your credit file so that they can see how much experience that you have with different kinds of credit accounts.
If you have a number of credit cards, but no other types of accounts then your credit score could be affected.
Difficulty Managing Your Credit Cards
When you have too many credit cards it will affect your ability to manage your payments. This means that you will need to be able to track your credit cards like your payment due dates, interest rates, fees and charges. It is easier to manage your credit cards when you only have a few like one to three credit cards.
Too Many Credit Cards
If you are just starting with credit or are looking to rebuild your credit then one credit card is enough. You need to learn how to manage one credit card before you take on the responsibility of more.
If your ability to manage your credit cards is getting out of control then that is a sign that you have too many credit cards.