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Newbie questions: Why so many cards?

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Established Member

Newbie questions: Why so many cards?

Hello All,

 

 

So I'm here largely on the basis of fixing my credit and getting it in to tip top shape by using the vaulable information and experiences others have had to inspire and teach me.


Since I am new I am baffled by some of the postings of people having an immense amount of credit cards.

 

1. Is there something I am not understanding about credit cards?

 

2. Is it great to have 5 or more cards and bad to have less?

 

3. What arre the benefits of having so many cards?

 

4. What are the downfalls?

 

This post is in no way meant to come of judgmental or novice.

I just want insight on the differences between credit styles and what this kind of credit style does.

 

 

Thanks in advance!

 

 

Wallet: JetBlue Plus Barclay MasterCard - $3000/ Cap One Quicksilver - $2500 / Citi Diamond Preferred - $2000 / Chase Slate - $2000 / Barclaycard Rewards Visa - $1900 / Discover It - $1900 / Target - $2100 / Macy's - $2100 / Victoria Secret - $950

Starting Score 6/17/13: EQ:651 EX:640
Current Score: TU:685 5/5/16 EXP: n/a 5/5/16
Goal Score: 750
Message 1 of 32
31 REPLIES 31
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Frequent Contributor

Re: Newbie questions: Why so many cards?

1. I dunno
2. Ppl with FICOs over 800 tend to have 7 accounts (on average)
3. If one card doesn't have a benefit/perk/cash back reward, ideally you'd like to find a card that does to increase your maximum return on using plastic instead of cash.
4. Too many accounts could be looked down upon (or apply for too many accounts in a relatively short period tends to raise red flags to lenders).

As always, your mileage may vary...
As of 1/10/2014 EX FICO - 748. EQ FICO - 728. Trans FICO - 755

WellsFargo - $3,000 AMEX BCE - $18,000 Chase Freedom - $4,000



Message 2 of 32
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Blogger

Re: Newbie questions: Why so many cards?

The number of credit cards affects 2 components of your credit score: utilization ratio and average age of accounts.

Remember this most important chart for credit scoring?

Remember this most important chart for credit scoring?

Utilization ratio is the ratio of the total reported balance to the total credit available. Utilization is directly tied to the amounts owed on your credit cards: obviously when you are wealthier and have more credit available to you, owing a couple of thousand dollars on your credit cards is not a big deal. But if you are fresh out of school without a permanent job and only have $2,000 in available credit, owing $1,500 represents very high risk of default. Having more cards means having more total credit and lower utilization ratio. This will help your score.

Average age of accounts is a measure of  ”New credit”. It is, well, the average age of all your credit and loan accounts, aka trade lines. The more new credit you have, the lower the average age of accounts. Each time you obtain a new trade line, the average age decreases. The more accounts you already have, the less the decrease in average age will be:

Say you have 9 cards averaging 2 years old, and you obtain a car loan. The new average age will be (2*9+0)/10 = 1.8 years, a reduction of 0.2 years in average age. On the other hand, if you have 1 card which is 2 years old and obtain a car loan, the new average age will be (2*1)/2 = 1 year – your average age of accounts just went down 50%! Your credit score will go down significantly. If you’re going to apply for a mortgage, the reduced average age may cost you tens of thousands of dollars of payments.

So my plan was to concentrate all the cards I wanted to apply for on the earlier stage of my credit building process, so that all the accounts will age together and minimize the damage to credit score from any future trade lines. With 1 year and 5 months of credit history, I am now past that stage, and that’s why I haven’t applied for credit for the last 4 months.

Apart from the credit score, how else does the number of credit cards affect your creditworthiness?

When you apply for credit, sometimes your application is not approved right away. The credit issuer decides that they need a human being manually review your application to determine if they should extend you credit. What would the credit analyst think when he/she reviews your credit profile and sees 20 open credit cards? Either of two things: you have financial trouble, or you are an excellent credit manager.

Why an excellent credit manager? Well, how else could you have handled so many accounts without ever missing a payment? This requires knowledge and discipline. And this is exactly what creditors are looking for in applicants.

Could the number of credit cards be due to financial trouble? Not really, if the most recent card was opened more than a year ago. If you were in debt, you’d have applied for credit last month, or the month before, or the month before. Especially when most of your accounts show a zero balance, and only one or two show positive balances, and small ones at that, the notion that you may be a high risk borrower is unfounded.

 

(Quoted from my blog post: http://hiepsfinance.com/2013/06/08/the-ideal-number-of-credit-cards-whywhen-more-is-better/ )

Message 3 of 32
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Valued Contributor

Re: Newbie questions: Why so many cards?

+1

*8/10/13
Message 4 of 32
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Valued Contributor

Re: Newbie questions: Why so many cards?

Five seems to be a magic number for 800+ credit scores.  That's not to say can't have an 800 score without that many as many many folks do.  Other reasons include but are not limited to:

 

Variety in lenders:  having back-ups is important.  Whether it be protection from  a lender shutting down your account or having technical issues.

Variety in reward structures: Pretty self explanatory.  Different cards give different rewards for certain purchases.

Utilization:  Larger limits and more accounts leads to overall lower utilization which has a dramatic effect on your score.

 

There aren't many downsides.  Having a ton of accounts is only looked down on by very few lenders and typically only for borderline decisions.  If you have a great score it isn't going to matter how many accounts you have to the vast majority of lenders.  Biggest downside is just keeping up with them by free services like check.me, mint.com, and manilla.com makes that easy these days. 

Message 5 of 32
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Established Member

Re: Newbie questions: Why so many cards?

Thanks to all for replying thus far and the helpful info!

 

So... I'd like additional advice then.

 

I have 2 high balance cards:

 

Barclay Visa = CL 1700/Current balance = $1500/APR = 20.24% from 22.99% (called & they lowered it yesterda 6/18/13y! see my post: Backdoor - Barclay APR success! )

Cap One Mastercard = CL 2000/Current balance = $1655/APR = 16.90% (calling today to ask for lowered APR)  

 

Barclay is getting payed down completely by July 1 the latest.

Cap One will likely get paid down by about 250 - 300 making my balance $1355.

 

This will put my total UTIL at about 36%. (this does not include student loans, only lines of credit as I was told istudent loans dont count towards util).

 

1. Will that be enough after waiting for my score to rise to app for cards?

 

2. Am I looking for any rise in my score or a particular score?

(please see scores in my sginature below)

 

3. Should I then app for 2 or 3 cards on the same day?

 

Backstory:

 

My 1st credit card was opened 6 years ago this month.

My most recent was April of last year.

My student loans opended April of last year as well, leaving my AAOA at 1year.

I have 2 inquiries on my account both from May 1, 2013.

I was denied for both inquiries. The denials led me to begin loggin on to myfico and building my credit and rmeoving anything from my account that was wrong.

 

 

Thanks again!

 

Wallet: JetBlue Plus Barclay MasterCard - $3000/ Cap One Quicksilver - $2500 / Citi Diamond Preferred - $2000 / Chase Slate - $2000 / Barclaycard Rewards Visa - $1900 / Discover It - $1900 / Target - $2100 / Macy's - $2100 / Victoria Secret - $950

Starting Score 6/17/13: EQ:651 EX:640
Current Score: TU:685 5/5/16 EXP: n/a 5/5/16
Goal Score: 750
Message 6 of 32
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Established Contributor

Re: Newbie questions: Why so many cards?


@Courtyj725 wrote:

Thanks to all for replying thus far and the helpful info!

 

So... I'd like additional advice then.

 

I have 2 high balance cards:

 

Barclay Visa = CL 1700/Current balance = $1500/APR = 20.24% from 22.99% (called & they lowered it yesterda 6/18/13y! see my post: Backdoor - Barclay APR success! )

Cap One Mastercard = CL 2000/Current balance = $1655/APR = 16.90% (calling today to ask for lowered APR)  

 

Barclay is getting payed down completely by July 1 the latest.

Cap One will likely get paid down by about 250 - 300 making my balance $1355.

 

This will put my total UTIL at about 36%. (this does not include student loans, only lines of credit as I was told istudent loans dont count towards util).

 

1. Will that be enough after waiting for my score to rise to app for cards?

 

2. Am I looking for any rise in my score or a particular score?

(please see scores in my sginature below)

 

3. Should I then app for 2 or 3 cards on the same day?

 

Backstory:

 

My 1st credit card was opened 6 years ago this month.

My most recent was April of last year.

My student loans opended April of last year as well, leaving my AAOA at 1year.

I have 2 inquiries on my account both from May 1, 2013.

I was denied for both inquiries. The denials led me to begin loggin on to myfico and building my credit and rmeoving anything from my account that was wrong.

 

 

Thanks again!

 


I would suggest getting your  util down as low as possible, preferably 1-9%... make sure the info posts and check what your score is. This will give you an indication of what cards you would have a good chance of getting. 


Starting Score: TU 686 EX 641 EQ 690
Current Score: TU 779 EX 767 EQ 740
Goal Score: 800 Club

BCE $12.5K, 5/3 Sig $10K, Wally Discover 10K, Cash+ $9K Sam's Discover 10K, Freedom $6K, Zales $5.5K, More $5K, Cap one $5K, Barclay 2.5K, Household Plat $1.5K, Household Gold $1.5K, Credit One $1K, First Premier Plat $.675K First Premier Gold $.65K
Message 7 of 32
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Frequent Contributor

Re: Newbie questions: Why so many cards?

Good questions!

You really need to get the util down on those cards.  Once you pay off Barclays, IF you use it make sure you pay in full each and every month. Then concentrate every extra penny you have on paying off the Cap 1. As mentioned by other posters, ideally you should have a total (reported) utility on 1 card to be between 1-9% ... so if you use both cards, make sure you are less than 9% on one and pay the other off before the statment cuts.  

 

This is one way people get higher numbers to appy for more credit.  If you are not searching for more credit, you can let balances report, but I would still PIF each and every month.  no need to pay the bank the interest... if you PIF you are using their money for free!

 

No matter what, raising a credit score takes time and patience.  And no drapping!  That can be a double whammy hangover Smiley Happy

Back in the garden!
App free since 23Oct2012 reset to 27Aug13 and reset again 4nov13
Message 8 of 32
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Blogger

Re: Newbie questions: Why so many cards?

I would rather spread the payment equally between the two cards. 50% on each card is better than 0% on one and 80% on the other.

Message 9 of 32
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New Contributor

Re: Newbie questions: Why so many cards?

The amount of credit cards open is personal preference. Having larger amounts of available credit helps with your overal Utilization therefore lowering the ratio if you actually carry some small balances.

 

I have several cc's becaus they all serve a purpose in my miles and points strategy.

 

The only downfall can be if you charge TOO much you cannot pay back in a month or two. 

 

Rewards cards are great if you find a great sign up bonus and waived annual fee!! Make sure you mix in some NO Annual Fee cards as well!!

 

 

01/11/13:
EQ Fico: 716 (from myfico)
TU Fico: 719 (from Walmart)
EX Fico: 719 (from myfico)

Chase Sapphire Pref. II AMEX Platinum II Amex PRG II Amex SPG II Citi AAdvantage II Barclays US Airways II Chase Freedom
Message 10 of 32
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