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There’s a strong connection between how you use your credit cards and your credit score. After all, credit cards are an easy way to show how responsible you are with borrowed money — the very thing credit scores are meant to gauge.
But if using one card responsibly is good for your credit, is it even better to use two or more? The answer: not directly.
You only need one card to build a good score
Using credit consistently and responsibly is really the only way to build a good credit score. For most people, the easiest way to do this is to get a credit card, use it conscientiously and make payments on time. This will add up to a lot of positive information on your credit reports, and, consequently, a better credit score.
But will you reap even more credit score benefits by having multiple credit cards? NerdWallet reached out to Anthony Sprauve, senior consumer credit specialist at FICO, which is responsible for the most widely used credit scores in the United States. “You don’t need multiple credit card accounts to have a good FICO score," Sprauve said in an email. "You can have a high score with one well-managed credit card account.”
It's a common misconception that you need multiple credit cards to have strong credit scores. That idea may be rooted in a misunderstanding about one element of credit scoring formulas: the mix of credit accounts on your report. Credit mix accounts for 10% of your FICO score. But "mix" in this context refers to having different types of accounts on your credit report.
“You are rewarded for having multiple kinds of accounts — auto loan, mortgage, line of credit, etc. — but you are not penalized if you don’t," Sprauve explained.
A credit card is a revolving account, meaning the balance goes up and down over time as you make purchases and pay them off. That's different from an installment account, like a mortgage, which has a balance that gradually decreases over time as you pay in monthly installments. It's good to have both revolving accounts and installment accounts on your report.
More cards could give you an indirect boost
Although adding extra credit cards to your profile won’t directly help your score, it could provide an indirect lift by reducing your credit utilization ratio. Utilization is simply the amount you owe on your cards divided by your available credit. It plays a major role in the 30% of your FICO score that's determined by amounts owed. The lower your utilization, the better — below 30% is preferable, and below 10% is ideal.
Utilization is calculated on each of your individual cards, as well as across all the cards in your name. Opening a new card account will boost your available credit, which can drive down your overall utilization, and that could have a positive effect on your score. This assumes, of course, that you don't run up a big balance on the new card.
Keep in mind, though, that opening a new card account can have both positive and negative score effects. For one thing, a new credit application will usually trigger a hard credit check, causing your score to take a small, short-term hit. A new card also lowers the average age of your open accounts, which could negatively affect the 15% of your credit score determined by the length of your credit history — especially if you have a short credit history to begin with.
Also, be careful not to open too many credit cards at once. Several credit card applications in a short window of time is correlated with credit risk, and your score will probably drop as a result. If getting one additional card will substantially improve your credit utilization ratio, applying might be smart — but be sure to wait at least six months before you get another.
Tips for building a solid score
If you’re trying to build and maintain good credit, you’ll need to show a strong and consistent track record of managing borrowed money responsibly. Specifically, it’s important to:
Pay all your bills on time. No exceptions!
Avoid using more than 30% of the credit available on each of your credit cards, at all times during the month.
Use credit regularly.
Only apply for credit you actually need.
Review your three credit reports at least once per year for accuracy. If you spot an error, take steps to have it corrected.