How many CCs is considered Optimal for FICO Scoring?

[haulingthescoreup]

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@Anonymous wrote:
How does not using most of the cards you have affect the scoring ? I have about 6 or 7 but only use 1 of them for almost everything (amex,high CL), one for everything that doesn't take amex and one at a department store that issues it. The rest never really gets used. I always pay the cards in full. Should I use the rest of the cards for small amounts? Or don't bother ?

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To keep the cards "alive," put a slurpee on each every 3 or 4 months. But you are probably doing the right thing in terms of how many cards you let report.

FICO likes to see at least a little bit of usage (promptly paid off), because otherwise it looks as if you are too terrified of credit to be able to manage it.

[haulingthescoreup]

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@Anonymous wrote:
I agree that closing accounts is not the best idea. Apparently, your CS is affected by the length of time you have had accounts open and the number of inquiries for new accounts. The longer you have had an account open the better. The fewer inquiries the better. I used to close accounts so that I could open others with better rates but this had the effect of lowering my credit score.

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There isn't an automatic negative affect on your scores by closing a card, because it should keep reporting for another 10 years (emphasis upon "should"). You don't lose the history until it drops off. It can be pretty painful when that day does come, though.

Where your scores get hurt are when you do have some balances due on other cards, and closing the other cards lowers your overall available credit. This makes your total utilization (total owed divided by total credit limits rise, and that can hurt your score if it moves to a new level.

So if you have 6 cards with a total of $6000 credit limits, and you have total balances due of $2000, you have an overall util of 33% (2000/6000), which is pretty high anyway. If you close two cards, each with credit limits of $1000, and you don't pay down your balances, you suddenly have a util of 50% (2000/4000), and you're going to feel the hurt.

[Anonymous]

Regarding an easy way to manage many cards, some of the banks have an online service that goes through Yodlee that lets you manage all your accounts on a single page that shows all your account balances, transactions, due dates, etc. in real time. I don't know all the banks offering it but I know that BoA and HSBC have it. This is probably going to be the first and last instance of praise HSBC will ever get on these forums, but I have to say that I think the format on their page is outstanding and very convenient.

I get to see all my CL's and how much they're being used, bank acct balances, student loans, utility bills, point balances for various reward programs, Paypal, and many others. I can see all the due dates and amounts in a clearly organized fashion. It shows my new emails in all my email accounts.

So there, you read that right, I'm actually advocating something HSBC.

[Anonymous]

I'd be inclined to agree with you if I didn't pay off all of my cards each month but since I do, closing CCs can't change my utilization percentage. Closing cards that I had for a long period of time affected the average length of time I have had (open) credit cards. A lower average lowered my score.

[Anonymous]

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elliptic wrote:
I'd be inclined to agree with you if I didn't pay off all of my cards each month but since I do, closing CCs can't change my utilization percentage. Closing cards that I had for a long period of time affected the average length of time I have had (open) credit cards. A lower average lowered my score.

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Closed accounts continue to count towards average age or as long as they are on your reports.

Unless you pay your cards off each month before the statement cuts, then your utilization would in fact be affected, because those cards will be reporting a balance.  FICO doesn't calculate your utilization based on the balance you carry, it calculates your utilization based on the balances reported, which are almost always the statement balances.  FICO doesn't care whether those balances are paid in full each month or not.

Once you close a card, its CL stops counting towards that utilization calculation, which automatically equates to higher utilization.

The score drop you referred to was not due to lower average age, but was most likely due to higher utilization.

Edited to clarify this point:

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elliptic wrote:
Closing cards that I had for a long period of time affected the average length of time I have had (open) credit cards. A lower average lowered my score.

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"Average length of time of open credit cards" is not a metric that FICO uses.  Neither is "average age of open accounts" or anything to that effect.  There is only "average age of accounts," which includes all accounts, open and closed.

Message Edited by cheddar on 03-26-2008 01:40 AM

[vulgy1]

My two cents: For FICO scoring, as I understand it, is about utilization and age, so the number of accounts will not matter.

However, hasn't Capital One been bad about reporting your Max limit? This will hurt your score if they don't.

As far as getting a mortgage (need help from a mortgage loan officer) doesn't having too many cards, with a high overall credit limit, hurt your chances on getting a mortgage?

Message Edited by vulgy1 on 03-26-2008 06:11 AM

[Anonymous]

Hi, vulgy1, and welcome to the FICO Forums!

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vulgy1 wrote:

My two cents: For FICO scoring, as I understand it, is about utilization and age, so the number of accounts will not matter.

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Number of accounts does matter as well, but only once you have very many accounts.

Also, the first few revolving accounts one gets will most likely help one's score a great deal.

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vulgy1 wrote:

However, hasn't Capital One been bad about reporting your Max limit? This will hurt your score if they don't.

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Capital One used to not report credit limits, which meant that FICO would use the "High Balance" field as a substitute for the credit limit when determining utilization.  This is no longer the case, however, as Capital One started reporting limits on all their cards as of Sep. 2007.

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vulgy1 wrote:

As far as getting a mortgage (need help from a mortgage loan officer) doesn't having too many cards, with a high overall credit limit, hurt your chances on getting a mortgage?

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Sometimes, but as long as you have no to low balances on those cards and an excellent history of payments, it shouldn't usually be a problem.

[Anonymous]

Thanks for the clarification cheddar. I have been paying off my balances before the statement cuts. That must be the reason for the inactive status on my cards. Regarding your comment: "The score drop you referred to was not due to lower average age, but was most likely due to higher utilization.", I still don't understand since I do pay off my cards before statement dates so it can't be higher utilization.

[Anonymous]

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elliptic wrote:
Thanks for the clarification cheddar. I have been paying off my balances before the statement cuts. That must be the reason for the inactive status on my cards. Regarding your comment: "The score drop you referred to was not due to lower average age, but was most likely due to higher utilization.", I still don't understand since I do pay off my cards before statement dates so it can't be higher utilization.

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In that case, my statement doesn't apply.  I was assuming that you were letting balances report, which was a bad assumption on my part.

I still maintain, however, that your score drop didn't have anything to do with average age changing due to closing an account (again, assuming that the account continued to report after it was closed).  There are a number of things that can cause an unexpected score drop, like number of accounts with balances, for example.  It could also be due to going from having small overall utilization (less than 10%) to 0% utilization.  (Yes, you can actually take a hit on your score by letting all zero balances report.)

Do either of those apply?

[HawgDude]

My wife and I recently started a focused effort to raise our scores using the MyFico ScoreWatch product as our tool of choice to monitor progress.  We had the usual towering stack of Chase, Citi, major and not so major store cards, etc.  We paid off and closed all keeping only my 34 year old Sears acct., our primary bank Visa, one Branded Chase Visa and a Branded Citi MC I use for Business.

After an initial dip due to all the acct. status changes both scores climbed steadily in the last four weeks...  I started at 728 and am currently at 797; My wife started at 734 and is currently at 807.  These are only the Equifiax scores from MyFico and I understand that score tends to be the lowest of the three!  We have not paid for scores from the other bureaus yet...  We'll wait another month or two on this and see what our monthly activity does to add to it.

We have started using the branded Chase card (for points) for everyday purchases and paying it off every two weeks.  The regular activity on the business card keeps its activity constant and updating as well.  Paying the CC's every two weeks is a trick I learned from a radio show on the topic one day.  Not paying any more, just make the payment in two payments throughout the month.  In my case it is the balance I see in Money at each pay cycle.

I would say we have found a good mix of CC qty. & activity to add to our scores!