*Disclosure: This article is general education, not legal or financial advice. Credit repair can't remove accurate, timely information, results vary by file, and you can dispute errors with the credit bureaus yourself at no cost.*
Having a strong credit profile is a very important part of life in our society. While the perfect credit utilization depends on one's lifestyle, it is important to understand that your credit health depends on the amount of credit lines you possess, as well as how frequently you use them and pay them off. Understanding how the three major credit bureaus calculate our credit scores is very important so you know how certain credit usage can boost your creditworthiness and overall score. This article helps you understand your own credit needs, and bring about a positive change in your financial life.
How many credit cards is considered too much/little?
There is no clear distinction of how many cards are considered too much or too little, however there are factors that play a vital role in whether your credit score will increase or decrease.
Having multiple credit cards is beneficial for increasing your total credit limit. With a goal of having the highest credit score, we want to make sure we have as much credit available to us as possible. In the same token, we want to use as little of it as possible. As a rule of thumb, it is recommended not to use more than 30% of your available credit at all times. The amount of credit you use is also called the "Credit Utilization Rate". For example, if you have a total credit limit of $5,000, and are using on average $1,250 of it every month, your credit utilization rate is 25%. Increasing your credit limit and decreasing your credit utilization will go a long way when repairing your credit score.
The average amount of credit cards per individual in the United States is 4, around 3 if you live in Nevada. However, there are people that are happy with a single credit line, and people who strive for 7-10 credit cards. Opening up new credit lines is a personal decision and depends on your financial needs and your situation!
How can you benefit from having multiple credit cards?
Having multiple credit cards has many advantages, and in many cases can help increase your score and keep your financial life healthy. So, what exactly does having many credit lines help you accomplish?
- For one, you get to increase your available credit. This is a major part of the credit repair process and helps increase your trustworthiness in the eyes of creditors, as well as lower your credit utilization (ideal to keep this below 30%).
- Having a back up plan in case one of your credit cards gets compromised or lost is extremely important. For example, in the unfortunate case that you experience identity theft, a second credit card can help you take care of day to day expenses as your main card issues get resolved. If you have been the victim of identity theft/fraud, The Credit Lion is here to be help you overcome that situation. Moreover, being prepared for emergency expenses is also an important part of financial literacy, and having a second/third credit line will help get out of sticky situations.
- Many credit cards come with member benefits, such as cashback on certain purchases, air travel perks, or even discounts for restaurants/stores. Having different types of credit cards that each help boost these benefits will simply help live a more fulfilling and interesting life
Drawbacks that come with owning multiple credit cards.
Keeping a healthy credit score is no easy feat, and is not as simple as opening multiple credit cards. In fact, the calculation behind your credit score is extremely sophisticated and takes into account a great deal of factors!
Yes, your payment history and utilization rate are the biggest factors that constitute your credit score, but credit history and number of new credit lines also majorly impacts your score.
Applying for too many credit cards in a short period of time can have an adverse effect on your credit report, as not only will the creditors consider you as a high risk client, but you will also rack up hard inquiries that will stay on the report for 2 years. Our team specializes in removing inaccurate, erroneous or obsolete inquiries from your report, so you can enjoy the financial freedom you deserve. It is recommended to keep the number of inquiries for new credit as low as possible, and space out your credit card applications in 6 months intervals.
If you are struggling with paying off debt on a credit card that you already possess, opening a new credit line will likely not benefit you, but rather be a hinderance toward financial freedom. Therefore, make sure to take into account the negative effect of hard inquiries on your report, as well as the hassle of being considered a high risk client by the creditors. Once again, the optimal number of credit cards to own depends on your specific situation and the lifestyle you live, and is a decision that requires a lot of thought.
Final takeaways for opening new credit lines.
- When applying for new credit cards, keep in mind that your report will be hit with a hard inquiry (stays on the report for 2 years)
- Do not apply for credit cards too frequently, but rather try to apply for new cards in at least 6 months interval
- When applying for your new card, make sure to check the benefits it provides, and what is best for your lifestyle.
- Keep working towards a higher credit limit, and a lower credit utilization rate!
What to do if there are errors with your credit report?
In the event that there are any inaccurate, erroneous, or obsolete accounts on your credit report, you have the right to seek help in disputing them. Luckily, The Credit Lion has a well-versed team of credit specialists that can help you get rid of any inaccurate inquiries, foreclosures, repossessions, student loans, late payments, missed payments, bankruptcies, charge-offs, public records, collections, judgments, tax Liens, short sales, medical bills, child support, and more. For more information on our credit repair services, please schedule your courtesy consultation with us today!
