Everyone knows maintaining a good credit score is important. The higher your score, the more attractive you will be to potential lenders, making larger loans and the best interest rates easily accessible.
Hopefully, you’re working hard to keep a high credit score by using your credit cards and paying on time. However, you may be wondering if more is better. Is having several credit cards and more available credit a good idea? Or, are too many cards a liability to your credit score? Read on for the answers to all your questions.
How your credit score works
As a Partner Colorado member, you can view your FICO® Credit Score through our Mobile Banking app. Let’s explore the major components of your credit that credit scoring agencies, like FICO and VantageScore, use to calculate your score.
- Your payment history. The timeliness of your payments comprises 65% of your FICO score. VantageScore calls payment history “extremely influential” in your score.
- Your credit utilization. Credit scoring companies look at how much of your available credit, in total and per line, you are using. A large amount of available credit, even accumulated across multiple cards, is not always a good thing.
- The age of your credit history. Lenders want to see a long and active history of credit cards and on-time payments.
- Your credit diversity. A variety of credit indicates you are an attractive borrower.
How opening a credit card affects your FICO score
Over time, having multiple credit cards can boost your score in two important areas.
- Your payment history. When you pay several credit card bills on time instead of just one, this component of your score will go up.
- Credit utilization rate. FICO likes to see a low credit utilization rate. This means the more unused credit you have, the higher you’ll score in this area. Having multiple cards open will automatically increase your available credit. You’ll also be able to spread your credit use across several cards, further lowering your credit utilization rate.
How many is too many credit inquiries
There’s no magic number of cards you should shoot for to achieve a high credit score. Instead, let’s take a look at the credit cards of consumers with excellent scores.
The FICO high-achiever statistics track people with FICO scores that top 785. These statistics find that the average FICO high-achiever has 7 open credit cards. Of these cards, only four have outstanding balances. The average credit account is 11 years old and the most recently opened account is 28 months old.
While it may be okay to have a few cards, having lots of new cards probably won’t help you achieve excellent credit. Rather, a proven track record of on-time payments and responsible use of credit is the vital factor here.
When not to open new cards
If you’re planning on taking out a large loan within the next year, applying for new cards can hurt your score. Here’s why.
- Hard checks. When you apply for a new credit card, your credit history gets pulled. Lots of “hard checks” can negatively affect your score.
- Your credit age will decrease. The age of your credit is determined by taking an average of the age of all your cards. By opening lots of new cards, you’re bringing that overall average down, and therefore hurting your score.
- Your credit variety will decrease. Opening more unsecured cards with revolving credit will lower your credit variety because you’ll now have more unsecured lines than other types of loans.
- Too much open credit. Lots of open credit will negatively affect your VantageScore. This score is used for auto loans and other large loans, though most mortgage lenders only consider your FICO score.
Keeping your credit score strong can positively affect your finances for years to come. Finding the right credit card will help improve your financial situation too. If you have too many high-interest credit cards, consider a balance transfer to our Rewards Platinum Visa®. For 12 months, there’s 0% APR on balance transfers and 1.99% APR on purchases. Plus, you can earn rewards points for every purchase you make and redeem the points for free travel, merchandise, cash back and more…all with no annual fee! Visit our website for more information.