How Many Credit Cards Are Too Many?

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When credit cards represent debt, it does affect your credit score; but how? What do creditors think about too many credit cards? Does the balance on those credit cards imply more problems than just the debt it represents? All these questions are asked by consumers more and more often as each day thousands fall into increasing credit card debt.

The Exact Number of Credit Cards

There is not really an exact number of credit cards that you should be carrying with you. However, more than 10 credit cards are completely unnecessary. Moreover, you should slowly replace your credit cards for credit cards with higher amount limits and lower rates. Why slowly? Because closing an old account will temporarily damage your credit and that is exactly what you are trying to avoid. And you should only do this if you can afford it and your debt to income ratio doesn’t suffer that much.

The idea is that the number of credit cards is not so important. What is really important is the amount of money you owe on them. Ten credit cards with the balance on zero all the time because you don’t finance your purchases and you use them just to avoid carrying cash, won’t alter your credit in a negative way and chances are that your credit history will benefit from such procedure. But accumulating high balances on your credit cards will definitely affect your credit score negatively and scare away new creditors.

Credit Card Balances and Credit Score

Too much accumulated debt affects your credit even if your accounts register no delinquencies. What is really important is to maintain your credit card balances within a reasonable range so income to debt ratio won’t suffer. Income to debt ratio is important when you are applying for certain loans and can determine a rejection if your debt payments are too high compared to your income but it can also contribute to generate late and missed payments that will ruin your credit.

Thus, a lousy income to debt ratio contributes (even if not directly) to ruining your credit. A reasonable balance percentage would be anything less than 35% of the credit limit. However, anything ranging from 25% to 50% is acceptable as long as you can always meet the minimum monthly payments.

Any amount above that will make creditors raise their eyebrows when watching at your credit report. This is due to the fact that even if you always pay the minimum payments on your credit cards, too much debt accumulated makes lenders doubt your ability to repay further debt. That’s the main reason why too much debt will lower your credit score even if there are no delinquencies on your credit report.

Thus, you should be very careful with the amount of credit cards you hold and always consider that having too many open lines of credit can scare away future lenders that you may need. Thus, if you don’t really use them, if you just have them because they where offered for free, should you close them? Yes, but carefully and with long time intervals between closures because older accounts contribute to your credit score positively.

So, don’t close all your account at the same time. Instead, slowly replace the credit cards you actually use with those with the lowest APR and the highest credit limit possible according to your needs, closing at the same time, those with the highest APR even if they offer exceptional credit limits.