Are Too Many Credit Cards a Bad Thing for Your Credit?

• Author: Chris Goyette
• Posted: 2024-10-16

Having credit cards is not necessarily a bad thing. Having too many of them can hurt your credit score. There is an ideal way to use credit that can both build your credit history and give you the money that you need when you need it. This will help your credit score instead of hurt it. Here are some tips for how to use your credit cards in a way that helps your credit.
 

Do Not Have Too Many Credit Cards

Many experts will tell you that having too many credit cards will pull down your credit score. It is easy to see why this is true. All of your available balances are money that you have the ability to draw on your credit. In many cases, issuers will give you credit practically blindly, and it adds up quickly. When the sum total results in you having much more available credit than you can possibly pay back, the credit bureaus will see that red flag and signal to future creditors that you may not be the best option to lend to in the future.
 

Do Not Blindly Close Credit Cards

There are some reasons why you would want to keep credit cards open, even if you are worried that you have too many of them. The first thing that you need to do is figure out exactly how much of your credit you are using. The percentage utilization is an important part of your credit score. Until you can bring your overall level of debt down, it may not make sense to close unused credit cards because it will increase your credit utilization ratio and bring down your credit score. Moreover, you may have some credit history already built up in these accounts that you will lose if you close the account. We are not saying that you should never close any credit cards, just that you should be very careful and deliberate before you choose to do it.
 

How Much Credit Should I Use?

In order to keep building credit history, you will need to utilize some of your available credit line. However, you are walking a fine line because you do not want to use too much of it. Ideally, you will want to have two go-to credit cards in your wallet. Your best bet is to use one primary credit card and have a secondary one available for you to use as necessary. When it comes to an ideal amount of credit to use, we recommend that you utilize between 10-15% of your available credit limit. Of course, you should not charge things that you do not need just to use the credit card, but this is your best ratio to keep building your credit history and score.

Some experts disagree and say that it does not matter how many credit cards that you have so long as you do not have an unreasonable number of them. If you have ten or more credit cards, that would probably be too many in anyone's book. However, they argue that the most important thing is not how many credit cards you have but how you use them. Instead of the amount of credit being an issue, these experts believe that the biggest problem is the amount of debt that you may have. In other words, it is not how many credit cards you have but how you use the credit.
 

Be Careful When Opening Credit Cards

Knowing this, you need to be deliberate an intentional when you are trying to open new credit card accounts. There needs to be a reason to open a credit card since the credit bureaus may see new credit cards opened as a threat to your credit rating. Opening new cards just for rewards when you already have a wallet full of plastic may drag your score down. Credit inquiries will not hurt much but a bunch of new credit cards will.

However, it may make sense to open a new card right now, especially if you think that you are going to need to credit in the near-future. Because of the pandemic, jobs are at risk. If you feel that you need to have more credit to protect you from the worst-case scenario, it can help to have access to a few thousand extra dollars when you need it.