How Many Credit Cards Should I Have?
People often ask me how many credit card accounts they should have to maximize their credit scores. The answer: no one knows for certain.
Your credit score is a numerical analysis of your credit history. There are a variety of scoring algorithms out there, and they are all top secret. While each algorithm’s methods may be slightly different, they all share in common the goal of quantifying your credit risk.
If you have too few credit cards (say, only one) that have not been open for very long, your credit history will be limited. Without sufficient history, banks won’t have very much information to evaluate your creditworthiness. Consequently you will be a greater risk and will have a lower credit score.
On the other hand, if you have too many credit cards (say, twenty), you will have plenty of credit history, but banks will see all the open accounts as potential opportunities for you to sink yourself deep into debt. Having too many cards will make you a greater credit risk and lower your credit score.
While having too few cards fails to demonstrate adequate credit history, having too many cards means that you could too easily get yourself into trouble. Clearly there must be some sort of middle ground.
Most experts agree that the most people should only have two or three credit cards. Two credit cards are much easier to keep track of than five, ten, or even twenty cards. And the banks are right: having too much available credit can lead you into debt.
Remember, the most important thing is not to worry about how many cards to carry. The single, most effective way you can improve your credit score is to build a history of on-time payments, regardless of how many cards you have.
