Credit Cards: When is More Better?
February 1, 2008
Is it financially good to have several credit cards? How many are too many?
The truth is there is no correct answer to those questions that fits every person. The number of credit cards you have should depend on how well you pay them each month. According to Emily Davidson, who is a credit expert at Credit.com: “You should have as many cards as you feel you can manage responsibly.”
Many consumers believe that having too many credit cards, in and of itself, is a bad sign to lenders. That really is not the case. Consumers who have credit cards that they cannot afford to pay on time, regardless of the number that they have, will, of course, be seen as credit risks. However, for those who pay on time there are benefits to having several credit cards.
Davidson went on to say: “They (the lenders) value having a lot of established, old credit cards on your account. Having a lot of activity and responsible behavior reported to the bureaus is good for your credit score.”
She goes on to say that consumers should realize that one of the most important issues concerning credit scores is the debt-to-limit ratio. The debt-to-limit ratio is a formula that indicates the level of debt that you currently have on hand in relation to your combined credit limit. What this means to consumers is that you will normally have a higher credit score if you have a high level of available credit and you pay your credit bills on time.
Of course, the inverse is true as well. Consumers who have several credit cards but max them out will often find themselves with the possibility of lower scores. It is the amount of available credit that is important in this ratio.
The best answer to how many cards are enough truly depends on the person and how well he or she can pay the bills and still maintain a high level of available credit.