how many credit cards is too much?

[Anonymous]

i have 6 credit cards and only one reporting a balance.how many credit cards are too much?

[cadavis0609]

The more the merrier I always say! Too much is really a personal preference, but never have more than you can pay. There are people in here who have 35 credit cards and people who have one and swear thats all they'll ever have. Either way, keep your balances low and make sure you can pay them.

[Anonymous]

Great question. How many credit cards are too many? The pundits on various financial forums always tell you: it depends. But that's a cop out.

Based on my research, 2 is clearly too few. And 6 may be too many, depending on the length and depth of your credit history.  Newbies just establishing a credit history probably shouldn't grab too many cards too quickly. It just costs you too many dings for the hardpulls on your FICO score. When you're starting out, the theory is to go slow and acquire credit cards no faster than 6 months apart. Visa, Mastercard, Amex and Discover certainly round out most people's lists of basic cards to have in your arsenal. 

I've actually read that 4 revolving credit trade lines are optimal. After that, you get more bang for the FICO score by adding paid off installment, auto, or mortgage loans to your mix of credit. Your mix of credit makes up 10% of your FICO score. Too many extra credit cards don't appreciably increase your credit mix at all. In fact, it may actually cost you points.

A word to the wise: watch those installment loans. Certain high interest finance company loans are viewed warily and may not help your FICO score at all. A secured personal bank loan of at least 6 months duration makes a much better addition to your credit history than a subprime, high interest, finance company loan or a payday loan over a 6 week period. 

On the other hand, if you've got a 20 year credit history, paid off an auto loan and have a paid off mortgage in your credit report, and a sterling FICO of 800+, you can literally do no wrong by applying for a nifty new card or two. 

I have also heard of people with over 50 credit cards. But that's just gotta be a nightmare to keep track of. And what's the point of such a massive collection of plastic? Why not just raise the limits on a handful of your most favored trade lines? 

 But who am I to judge what other people's credit needs are?  For me, 4 credit cards is fine for now. Down the road, we'll see. 

Regards,

Cato

Message Edited by cato on 11-06-2008 05:27 PM

[fused]

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cato wrote:

Great question. How many credit cards are too many? The pundits on various financial forums always tell you: it depends. But that's a cop out.

Based on my research, 2 is clearly too few. And 6 may be too many, depending on the length and depth of your credit history.  Newbies just establishing a credit history probably shouldn't grab too many cards too quickly. It just costs you too many dings for the hardpulls on your FICO score. When you're starting out, the theory is to go slow and acquire credit cards no faster than 6 months apart. Visa, Mastercard, Amex and Discover certainly round out most people's lists of basic cards to have in your arsenal. 

I've actually read that 4 revolving credit trade lines are optimal. After that, you get more bang for the FICO score by adding paid off installment, auto, or mortgage loans to your mix of credit. Your mix of credit makes up 10% of your FICO score. Too many extra credit cards don't appreciably increase your credit mix at all. In fact, it may actually cost you points.

A word to the wise: watch those installment loans. Certain high interest finance company loans are viewed warily and may not help your FICO score at all. A secured personal bank loan of at least 6 months duration makes a much better addition to your credit history than a subprime, high interest, finance company loan or a payday loan over a 6 week period. 

On the other hand, if you've got a 20 year credit history, paid off an auto loan and have a paid off mortgage in your credit report, and a sterling FICO of 800+, you can literally do no wrong by applying for a nifty new card or two. 

I have also heard of people with over 50 credit cards. But that's just gotta be a nightmare to keep track of. And what's the point of such a massive collection of plastic? Why not just raise the limits on a handful of your most favored trade lines? 

 But who am I to judge what other people's credit needs are?  For me, 4 credit cards is fine for now. Down the road, we'll see. 

Regards,

Cato

Message Edited by cato on 11-06-2008 05:27 PM

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This is not true. I have seen credit files with only two cards and scores in the high 700's.

Closed installment accounts are not included in FICO credit mix scoring.

I agree with this if there are too many accounts reporting any balance.

It's actually the opposite, FICO high achievers (scores of 760+) in most cases will take a bigger hit when applying for a CC. I have lost nearly 25 points the last few times I apped. I took a hit for the inq and another hit to my average-age of accounts.

Four credit cards is sufficient to build a very solid credit card history.

[Anonymous]

Hello Fused,

This is cool. Let's compare some notes:

1.) Having 2 trades lines probably wouldn't keep you from having a good FICO score but it's my understanding a couple additional cards don't hurt as far as your mix of credit goes. I agree 4 revolving cards is solid foundation to build upon. 

Closed installment accounts are not included in FICO credit mix scoring.

2.) Aren't paid installment loans a permanent part of your credit history for a period of 7 years?

Are you saying you get more FICO benefit from an installment loan before it is paid off and less benefit after the fact?  No offense intended, I'm sure you're an expert in these matters. But please show me a link or a quote that  indicates your FICO mix of credit scoring suffers from having a paid off installment loan.

Too many extra credit cards don't appreciably increase your credit mix at all. In fact, it may actually cost you points.

3.) Yes, I believe that's right. As far as the effect of multiple revolving credit cards on the mix of credit, I've never seen any credible evidence that, say, 50 credit cards improves your FICO scoring for your mix of credit. The point of diminishing returns is variously put at 4 to 6 credit cards. But this is from pundits and not from FICO itself.  If you have better sources I'd sure like to see them.

4.) Sorry to hear you took such a big hit for applying for a new credit card. I do sympathize there. But if you have an 800+ FICO score, and you take a hit of 25 points by applying for a new credit card, what have you really lost?  Are scores of 775, and above, anything to be ashamed of?  If so, this is pretty tough room. I feel pretty comfortable with a 748, myself, but I'll graciously accept higher scores as I earn them. I'm just not going to sweat them much once I hit the high 700s.

And as you well know, the hardpull inquiry drops off in 12 months for FICO purposes and your reduction in average account age, while regrettable, pales in comparison to the benefit you get from your length of credit history, no? And your length of credit history remains intact so long as you don't cancel your oldest tradeline.

By this logic, nobody should ever apply for a new credit card since this always reduces average account age considerably. But a balance of needs has to be struck somewhere, right? 

Again, from my perspective, anyone with a 20 year+ credit history, a healthy mix of credit, no blemishes or recent inquiries, and an 800+ Fico can well afford to take the hit of a new credit card. I'm pretty sure they'll recover from the blow. Do you disagree?

Regards,

Cato

Message Edited by cato on 11-06-2008 07:22 PM

[Anonymous]

There are never too many as long as only one reports monthly and gets paid in full without paying interest!!!

Good marks...like paid off car loans hang around for 10 years....(bad debt is the 7 to 7.5 years). 

Message Edited by 1111mel on 11-06-2008 10:18 PM

[Junejer]

Hi cato, Fused didn't say that closed installment loan accounts don't help your score. He said that they do not count in the FICO scoring mix, as only open accounts are included in the credit mix. Those closed accounts will remain on your credit file for up to 10 years after you close them.

I personally attained an EQ FICO of 790 with one open CC a few months back.

[Anonymous]

Hi Mel,

There are never too many as long as only one reports monthly and gets paid in full without paying interest!!!

I used to think that way back when I had 22 credit cards in an accordion billfold that could almost touch the floor whenever I whipped it out!

But practically speaking, maintaining so many cards required such frequent use of them as to drive me to the brink of bankruptcy. Failure to use them would lead to them being closed for inactivity.  And years ago, PIN numbers were often assigned to you at random making it deuce difficult to keep track of them all. Don't get me started on paper check payments, long lines at the bank and monthly statements by snail mail.    

Life is getting better all the time, though. Paying online is a pleasure, not a chore. And the option of automatic payment of the minimum balance, as a backstop, in case I accidently miss a payment gives me real piece of mind. Most of my late payments from my youth were the result of disorganization--not an inability or unwillingness to pay.

But I have to admit I have a real hard time understanding the need for anyone having more than 6 to 8 credit cards for personal use. Maybe a few extra charge cards could prove useful in emergencies. But why not go for higher limits on the cards we have rather than risk toxic shock syndrome with so much plastic in your wallet?   Maybe I'm just old fashioned but anyone with 50 credit cards sounds like someone crying for help---or attention.  

Many thanks for the correction on the length of time a retired loan stays on the credit report. My bad.

Regards,

Cato

Message Edited by cato on 11-06-2008 09:36 PM

[Anonymous]

Hey Byrdman,

    Thanks for straigtening that out. There isn't much detail available on the breakdown of FICO's scoring methods. I do appreciate it.

Regards,

Cato 

[Junejer]

No problem, my friend.