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Does Having Too Many Credit Cards Hurt My FICO Score?

Credit Cards, Credit Score
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When it comes to credit cards, how much is too much? Unfortunately, there is no “magic number” of credit cards to pursue.  There are guidelines that can help you navigate your way to solid financial ground, though.

Remember, the number of cards you have can affect your credit score, which then affects your ability to secure everything from car loans to apartment rentals.

With that in mind, here are a few things to keep in mind if you’re thinking of opening (or closing) another credit card:

Your debt-to-credit ratio

Also known as a credit utilization rate, the debt-to-credit ratio measures your total outstanding balance against your total available credit. This number is a pretty big deal; it can account for almost a third of your overall credit score. In general, keeping your balances below 30% of your available credit should help you maximize your score.

By opening new cards (and increasing your overall line of credit) you could theoretically improve your credit score by decreasing your debt-to-credit ratio. That said, don’t rush out to open 100 new cards. A rapid increase in your credit limit makes you appear in need of fast cash – a red flag to creditors.

That advice actually goes both ways. Though it may seem counterintuitive, rapidly closing your old cards can similarly hurt your credit score by weakening your debt-to-credit ratio. Rather than close the cards, you may be better off paying off any outstanding balances and then simply locking away the old cards.

Age matters

When it comes to your credit cards, age matters. Creditors like to see a long, stable credit history. It’s not enough to have one really old card, though. Your FICO score considers the average age of all of the cards you own, so opening a lot of new credit cards risks bringing down your average and damaging your credit score. 

It’s not much credit you have, it’s how you use it

About 65% of your FICO score is decided by your payment history and amounts owed. That means that far more important than how many cards you have is whether you consistently pay on time. It’s one of the few surefire ways to improve your credit score.

Less important than payment history, but still important to your FICO score are the types of credit you use; the diversity of your credit can account for up to 10% of your total score. To be clear, adding more credit cards does not help diversify your credit. You are simply adding more unsecured, revolving credit to your name, which may end up working against you.

The bottom line

There is no silver bullet. What you should aim for is a balance of credit cards that gives you a healthy debt-to-credit ratio and allows you to make your payments in full and on time – a balance that will set you on the road to building a long, dependable credit history.

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