how many lines of credit should i have

How many lines of credit should I have?

There is no perfect number for determining how many lines of credit you need. However, having multiple cards can benefit your credit score.

Is there a perfect number of credit cards or lines of credit to have?

Unfortunately, there is no perfect number to the amount of lines of credit you need to have excellent credit. However, there are some guidelines that can help boost your score, such as a FICO score, by increasing the different types of credit you have and having a good credit mix. The importance of having more than one credit card is that it increases your overall credit limit, making it easier to have a low credit utilization ratio.

how many lines of credit should i have

How many accounts is too many?

It is important to know that there is no maximum number of cards you can have. However, having too few accounts or a bad credit mix can affect your credit score for the worse. The three major credit bureaus currently recommend that five or more accounts on your credit report is a good idea to think about. 

Thin credit files may have your credit card issuer thinking you are riskier to lend to. In addition, a more filled out credit history will not only increase your available credit, but it will also help you keep your credit utilization low.

However, be sure to stay on top of each card’s due date – having a lot of cards can make this difficult. Missing payments can be devastating to your credit score and hurt your payment history. Be sure to establish good financial habits and good organizational skills before opening too many credit cards.

Remember to space out your applications

Because each application for a line of credit requires a hard credit pull, be sure to space out your applications. These hard inquiries can negatively impact your score temporarily.

Also, applying for multiple cards in a short time span can indicate you as a risk to credit card companies. Space out applications  about six months apart to have the least impact on your credit score.

In addition, plan out your credit applications with your big purchases. For example, if you are looking to buy a house, keep that six month time frame in mind to keep your score in tip-top shape for when you apply for a mortgage.

Leave your old credit accounts open

When you open a new credit card, do not rush to close any old accounts; instead, keep them open. Over time, removing these older accounts will also remove them from your credit report, reducing the age of your accounts. In addition, this will lower your overall credit limit. 

Keep those accounts open; even if they are inactive, they will not harm your score. However, if the card you use has an annual fee, the ding to your score may be worth the money savings.

Rewards accounts

Opening credit cards with reward perks can give added perks, as well as help you build up your credit score. Rewards cards can help you rack up points that offer cash back or other perks, such as travel miles. However, these cards may have higher interest rates than some other cards.

The importance of available credit

The more credit accounts you have, the more available credit you have. The amount of available credit you have can actually help your score by lowering your debt-to-credit ratio. Having multiple credit cards will increase the amount of available credit you have access to.

Experts say that keeping your overall utilization below 30% is optimal. Keeping this number low will improve your score.

Be careful, having available credit does not mean you should use it and go into debt. In cases such as these, having a high amount of available credit may actually hurt your score.

How much total credit should I have?

Simply speaking, the answer to this question is that it depends. Depending on your situation and how you view your finances, this number can change.

Remember, it is not the actual number that matters, what matters is how you use it. Keeping that credit utilization low will be better for your score, rather than maxing out your credit limit.

Always use your credit accounts responsibly

The most important thing when it comes to credit is to use your credit accounts responsibly. The following list can help you manage your credit cards smartly and help you to build, improve or maintain your current credit score. For more information about credit repair, click here to see how we can help.

  • Keep your balances low: If you are currently carrying a balance from month to month, work to pay those balances down. This will help to improve your score by increasing the total available credit you have. In addition, this will also save you money – when this balance is paid in full, it will no longer accrue interest at the end of each month.
  • Pay off your card in full each month: One of the best credit habits you can have is to pay off your card’s balance in full each month. If you are worried about missing a payment, setting up auto-pay will help. Keep in mind that your payment history will have the biggest impact on your credit score. Always pay your bill on time each month to keep your credit score in good health.
  • Keep your old accounts open: As mentioned above, keep old credit cards open, especially if they do not have an annual fee. Closing these accounts down can lower your credit score by increasing your credit utilization rate and decreasing the overall age of your credit history.
  • Open new credit cards: Although a new card may temporarily decrease your score, opening a new card will increase the amount of credit you have available to you, therefore giving your score a boost. Remember, just because you have more credit to use, that does mean that you must use all of it. Instead, harness this higher limit by decreasing your debt-to-credit ratio.
  • Ask for limit increases: If you do not want to open a new credit card, most credit issuers will increase your limit if you have shown that you have been responsible with your card. All you have to do is ask. If you keep your spending habits the same, your credit score will get an instant boost by lowering that utilization ratio.

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