How Many Credit Cards Should You Have to Improve Your Credit Score?

Millions of people have varying numbers of credit cards, and it seems questions about how many should a person have gets bantered around without a definitive answer. From a credit score perspective, a specific number or type of card matters greatly. 

Credit scoring algorithms get a little tricky and to realize a high score, people develop new techniques designed to build their score, but eventually fail due to changes in scoring mechanisms. As you read about this topic, you will find people offer different ideas and ways to garner better results with each new technique. 

Numbers Matter
An important part of credit scoring is the number of cards you have at one time. Credit bureaus like to have enough information about you and your bill payment history to help them develop a correct score. However, too many credit cards can lower your score, too. 

That said, it’s accepted practice to own between three and five revolving credit accounts from Visa, MC, Amex, and Discover to help your credit score over time. Over five accounts open at one time might flag credit bureaus of difficulty paying bills on time. 

It’s a delicate balancing act and people get confused to a point of closing all their credit accounts, which backfires badly! You see, scoring algorithms use your debt-to-income ratio to develop your score together with your history of on-time payments. 

Available credit indicates a level of trust from the credit provider, showing confidence in your ability to make payments on time long term. When an account is maxed out, the ratio changes and reflects lower available credit, which in turn creates a downward trend in your scoring results. 

Use Each Card Wisely
The ratio mentioned here ties in directly with your credit utilization, or to say it another way, how you make practical use of your credit. Credit utilization is a measure of how much available credit you have. 

The measure of utilization is expressed in percentage of available credit and used by the all credit scoring models which helps lenders determine risk. The percentage equals your card balance divided by its limit. For example, if your balance equals $500 of a limit of $1000, utilization is 50%. However, if your balance is $900 with a limit of $1000, it becomes 90%. 

The aim is 30% or less. A lower utilization percentage shows to creditors responsible use of credit, and results in higher scores. 

Why Not to Cut Up that Card
Let’s assume you have over five and you pay them on time every month, which helps in the payment history category. If the balances aren’t zero every month, it’s time to pay them off quickly to help your ratio. Don’t close them; just bring the balances as close to zero as possible. 

As the balances get closer to zero, get into the habit of paying them off every month and use the money interest free. Not only will you save money on interest, you will seriously help your credit history and the scoring bureaus will see you’re responsible with credit and boost your score.