Can you have too many credit cards?

Casually Hardcore

I have a number of credit cards that I got to take advantage of no interest terms and stuff. I don't really keep a balance on them and I generally pay off the balance every month if I use them. I try to rotate the cards I'm using to make sure they don't become inactive.

Question is, can you have too many credit cards? Does it look bad if you have 5+ credit cards?

see317

If you're worried about your credit score, I'd suggest signing up for Credit Karma. It's not always up to date, but unless you're shopping for a car or house or other large purchase, knowing last month's credit score is as good as knowing today's.

That said, according my CK report, the number of accounts you have has a fairly minor impact when compared to how much credit you're using, late payments, or "derogatory marks" (listed as collection accounts, bankruptcies, foreclosures, tax liens, etc...).

So, as long as you're not carrying huge balances, I don't think there's a downside to having a lot of cards, provided that you have the self control not to do something stupid with the cards (which it sounds like you do). Provided the cards you have don't have crippling annual fees or something where you get nailed just for having a card even if you don't use it.

Daimar

If you are trying to get a large loan like a mortgage it may reduce the total amount you are able to get approved for if you have a lot of available credit on cards.

McFodder

Generally when a financier is looking at serviceability for a loan, they work off the limit of your credit cards rather than how much you've actually got outstanding. If your capacity is tight it could make the difference.

Other than that, no real harm if you have the self control, but generally no benefit either.

Jasconius

you can have too many *new* credit cards, as opening a lot of credit accounts in a short period of time (short is defined here as less than 2 years) is a big warning signal to almost any creditor

total potential debt (as Daimar has mentioned) is a minor factor on home loans, particularly if your income is low relative to your account sizes

However, having a bunch of nice old juicy credit cards with decent limits is subjectively a good thing. I average a new credit card about every 18 to 24 months starting when I graduated high school. I am now teetering on an 800.

So, it can work. Just don't screw up and get into debt. My cards are empty.

bowen

If you've still got cards, and you're not using them every quarter, they will potentially stop reporting on your credit report, so you should use them every few months, a tank of gas, some groceries, whatever.

Thundyrkatz

I think its been said before, but its really more a factor of how much available credit you have compared to your capacity to pay it off. Like, how much trouble could you get yourself into.

So if you have 2 cards with $5k each or 5 cards with $2k each is no different. However, this can work against you if you carry any debt if one of the cards gets closed on you.

Say you had 5 cards with $2k credit each for $10k of total credit and you were carrying say $4k of debt on some of them. that means you had 60% of available credit left. But if 1 card decided to drop you and you now have 4 cards with just $8k of total credit with the same $4k debt your ratio of available credit will drop to 50%. That will ding you.

Sir Carcass

bowen wrote: »

If you've still got cards, and you're not using them every quarter, they will potentially stop reporting on your credit report, so you should use them every few months, a tank of gas, some groceries, whatever.

They can also close the card. We had that happen with the first credit card we paid off. It had a limit somewhere between $10k and $11k with most of it full. We paid it off with a low interest loan and stopped using it, and something like 6 months later they closed the account due to inactivity.

I've found that having a high amount of available credit is a good thing. I think we currently have something around $30k in available credit and at last check, our scores were both above 810. When we started looking for a home loan, it was a high debt to income ratio that hurt. We went from being flat out denied for a mortgage (due to government rules) to being approved for ridiculous amounts a couple of years later after paying off the debt and having the credit available.

bowen

High limit, low utilization (<30% of your debt being carried month to month), and no late payments is the best way to improve your score.

You also want to not pay it off before a statement is issued, that can cause an issue with accounts if you charge gas, then immediately pay off the balance.