Having multiple credit cards won’t necessarily hurt your credit score, and, in fact, it can sometimes help. But if you have more cards than you can handle or use them irresponsibly, your score could drop considerably. [This article was first published on The Simple Dollar website in 2020. Updated in January 2022.]
Payment history: 35%Amounts owed: 30%Length of credit history: 15%Credit mix: 10%New credit: 10%
Now, let’s break down each of those in terms of how using multiple credit cards has the potential to hurt your credit score. But while that’s a danger, there are ways to prevent it from happening. By setting up automatic payments on all of your accounts, for instance, you can ensure that you’ll never miss one. Also: Do business credit cards affect your personal credit score? Even if you do, credit card issuers typically don’t report late payments to the credit bureaus until after you’ve been late for 30 days. So if you miss your due date but remember to pay the next day, it won’t show up on your credit report; the only consequences will be a late payment fee, interest, and possibly an increased penalty APR. The lower your credit utilization ratio on each card and across all your cards, the better. So, in this case, having multiple credit cards can actually help your score by increasing your overall credit limit and spreading out your balances across multiple cards. For example, let’s say you have one credit card with a $3,000 balance and a $5,000 credit limit. Your utilization rate on the card is 60%, which would negatively impact your credit score. If, however, you have three cards with a $1,000 balance and a $5,000 limit on each, your utilization drops to 20%, which is generally much better for your credit. But while that sounds bad, remember that your length of credit history only makes up 15% of your credit score. And since the average age of your accounts isn’t the only component of your history, the impact may not be very noticeable. Having more than one credit card account may help improve your credit mix. But according to FICO, this factor isn’t crucial in calculating your score unless there’s very little other information in your credit profile. According to FICO, each new hard inquiry can knock up to five points off your credit score, but many scores won’t be affected at all. Even if your score does drop slightly, it’s not a permanent drop. Also: The best starter credit cards for no credit This factor could make a difference if you apply for multiple credit cards in a short period of time. Not only could multiple inquiries have a compounding effect on your credit score, but it could also be a red flag for lenders. So as long as you space out your credit card applications and use credit responsibly in general, you likely won’t see a compounding effect on your credit score. What’s more, some credit cards offer benefits that other cards don’t, and having more than one in your wallet can ensure that you can take advantage of all the benefits you want. There’s no universal answer to the question of how many credit cards is too many because everyone is different. If you have good organizational skills and can easily stay on top of your card management, you’ll likely know when one more is too much. But if the idea of keeping track of more than one or two cards gives you anxiety, it may be better to restrict how many you keep in your wallet. And if you struggle to contain your spending, having no credit cards at all may be the best strategy for you.
