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What is the magic number of credit cards to have?

apache2a
Valued Member

What is the magic number of credit cards to have?

This is probably covered somewhere, but I searched and cannot find it.  Not actually looking for a magic number, just understading.

 

How many open cards should a person have to maximize their score/benefit and how much credit should be on these cards?

 

I think I saw somewhere that a person should have 21 accounts?  Really?  That would include all types, but that seems rather extreme.  There's no way I'd even try to do that no matter how good it might make my score.  

 

How many closed accounts should a person have (if any)?  

 

Is there a number that is too many?  If you have 40 credit cards does that kill your score? (I'm guessing it does) 10?  5?  

 

Thanks...I guess the low down of the question is how many is too many and how many is too few? (and any accompanying balance information that would go with it)....and just for score maximization purposes, no specific purpose in mind other than that.

6 REPLIES 6
rbentley
Established Contributor

Re: What is the magic number of credit cards to have?

Maximum FICO scoring optimization occurs with 3 CC and one open installment loan.  I read an article recently on those with 850 FICO  scores and they, on average, had three open CC, one installment and three closed cards.  There is no need to have "closed accounts" for optimal FICO scoring.

Message 2 of 7
MaizeandBlue
Senior Contributor

Re: What is the magic number of credit cards to have?


@apache2a wrote:

This is probably covered somewhere, but I searched and cannot find it.  Not actually looking for a magic number, just understading.

 

How many open cards should a person have to maximize their score/benefit and how much credit should be on these cards?

 

I think I saw somewhere that a person should have 21 accounts?  Really?  That would include all types, but that seems rather extreme.  There's no way I'd even try to do that no matter how good it might make my score.  

 

How many closed accounts should a person have (if any)?  

 

Is there a number that is too many?  If you have 40 credit cards does that kill your score? (I'm guessing it does) 10?  5?  

 

Thanks...I guess the low down of the question is how many is too many and how many is too few? (and any accompanying balance information that would go with it)....and just for score maximization purposes, no specific purpose in mind other than that.


 

There is no magic number of credit cards that one should have.  However, the revolving debt portion of your credit score is optimized by having three credit cards.  Why three?  Because that allows you to practice All Zero Except One (AZEO)* without incurring a penalty for too many accounts reporting balances.  If you have only one card and it reports a balance to the credit bureaus you will be penalized for 100% of your cards having balances. With two cards, if one reports a balance you will also incur a penalty for 50% of your cards reporting a balance.  Three cards allow you to have only one card report with a balance and not incur a scoring penalty.

 

*AZEO is a technique advocated where the balances on all your cards except one are paid off monthly before they report to the credit bureaus.  One card should be allowed to report a minimal amount like $20, which should then be paid off by the due date to avoid paying interest.

 

The installment debt portion of your credit mix is optimized when you have one installment loan with a outstanding balance of less that 8.9% of the original loan remaining.

 

The key to having excellent credit scores is to ensure that you always pay on time, and to keep your balances relatively low (those two factors are 65% of your score).  Keeping the individual utilization on each of your credit cards below 28.9% of their available balance, and aggregate/total utilization below 8.9% will give you the best possible outcomes.

 

There's a well-known Youtuber who claims you need 21 credit cards but that's not clearly not necessary.





Message 3 of 7
NRB525
Super Contributor

Re: What is the magic number of credit cards to have?

You optimize score by always paying every account at least the minimum on time, and by having at least one revolving CC account report a balance. 

 

The techniques of multiple cards, managing utilization to be a very low level, and managing an installment loan to be low utilization are just ways to game the score calculation. 

 

Beyond that, aging the accounts you have ( always paying on time ) and reducing borrowing amounts gets you closer to maximum scores. FICO is very happy when you have accounts that are years old, with small borrowed balances, because that reduces risk of the borrower defaulting. Ultimately FICO is a measure of default risk. 

 

But not borrowing much money is not really using credit, so if you want a high score, don’t borrow very much, and be older Smiley Wink

 

You have to make a distinction between optimizing score and maximum score.

 

Optimizing score is dependent on age of accounts, paying on time, and your choices of what you need to borrow. Younger accounts are within a scoring range that does not include the 850 maximum. Accounts with late payments are significantly penalized to make it impossible to reach maximum possible score, until the lates age off the account. 

 

Maximum score is achieved with aged accounts all paid on time, limited new accounts, and low borrowing, to simplify it. 

 

Closed accounts that that have no lates do not negatively affect score. 

High Bal Jan 2009 $116k on $146k limits 80% Util.
Oct 2014 $46k on $127k 36% util EQ 722 TU 727 EX 727
April 2018 $18k on $344k 5% util EQ 806 TU 810 EX 812
Jan 2019 $7.6k on $360k EQ 832 TU 839 EX 831
March 2021 $33k on $312k EQ 796 TU 798 EX 801
May 2021 Paid all Installments and Mortgages, one new Mortgage EQ 761 TY 774 EX 777
Message 4 of 7
SouthJamaica
Super Contributor

Re: What is the magic number of credit cards to have?


@apache2a wrote:

This is probably covered somewhere, but I searched and cannot find it.  Not actually looking for a magic number, just understading.

 

How many open cards should a person have to maximize their score/benefit and how much credit should be on these cards?

 

I think I saw somewhere that a person should have 21 accounts?  Really?  That would include all types, but that seems rather extreme.  There's no way I'd even try to do that no matter how good it might make my score.  

 

How many closed accounts should a person have (if any)?  

 

Is there a number that is too many?  If you have 40 credit cards does that kill your score? (I'm guessing it does) 10?  5?  

 

Thanks...I guess the low down of the question is how many is too many and how many is too few? (and any accompanying balance information that would go with it)....and just for score maximization purposes, no specific purpose in mind other than that.


IMHO an ideal number is 3 to 5, with ideal FICO scoring coming in at 1 card reporting a small balance while the others report zero balances.

 

Your 21 account information is wrong; it probably derives from Credit Karma which spews false information of that nature.

 

As far as total number of open and closed accounts, including installment accounts, is concerned, there has been some reason to think that 11 is a perfect minimum and 20 is the maximum for perfection.

 

 


Total revolving limits 663000 (585000 reporting) FICO 8: EQ 716 TU 747 EX 713

Message 5 of 7
apache2a
Valued Member

Re: What is the magic number of credit cards to have?

Thank you very much, I really appreciate it.

Message 6 of 7
BrutalBodyShots
Super Contributor

Re: What is the magic number of credit cards to have?

While it's sort of splitting hairs and insignificant, many people do experience their first score ding with 33% of their cards reporting a balance on Equifax (but not EX/TU).  We're probably only talking 3-5 points on most profiles, but if you're talking about total score maximization purposes across all 3B it would take some people 4 cards to max out their EQ score with AZEO.

Message 7 of 7
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