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How does the number of credit cards affect my credit score?

Determining the right number of credit cards can be confusing. Some people obtain lots of cards to increase their available credit. Others may have one card to keep their balance due low. Both of these credit-building strategies have benefits and drawbacks consumers may want to consider.

Credit reporting agencies determine your credit utilization score, otherwise known as a credit rating. This score is based on available credit and the amount of debt you hold on your credit cards. To improve your credit utilization score, some credit should remain available while you regularly pay down balances.

It can help your credit score to have two to three credit cards, in addition to other sources of credit, that you maintain in good standing.

How do new credit cards affect my credit score?

One mistake consumers make is acquiring new credit cards too quickly. Each time you open a new line of credit, your credit score may drop by about five points. Since each new card is a new line of credit, new credit cards will shorten the length of time of your reported credit history. Opening several new cards in a short period of time can reduce your rating. 

Once you open a new card, however, it won’t take long for your credit rating to improve if you use it responsibly and pay the balance down each month. Because the rating factors how long you have held the credit line, the impact of new cards will be offset over time by a longer positive reporting history.

One strategy to improve your credit history is to regularly check your credit score and remove inaccuracies by making a Credit Card Inquiry. Since each agency operates independently and calculates the credit score differently, it can help to check with the different agencies to get the best idea of your overall score. Obtaining your history is free, and it can also help you to monitor fraudulent or erroneous charges.

How many credit cards can I keep open?

There is no right number for everyone. It will vary depending on a multitude of factors, including a family's financial situation and the card’s debt limit. Two or three credit cards is a sensible amount for most people. More than three, and it can become difficult to manage balances without missing payments or accumulating too much debt if each card is not paid in full every month.

According to a 2021 Experian State of Credit report, half of all Americans had at least two credit cards, with 13% having at least five cards. The credit reporting agency found that Gen Z Americans had 1.9 cards as of 2020, while Baby Boomers had 4.6. On average, Americans carry more than $5,000 in debt per card with an average debt limit of just over $30,000 per person.

The way to make credit cards work for you is to maintain a good credit utilization score. The best way to improve your score is by maintaining a good credit line-to-debt ratio and avoiding using the maximum amount of credit. Paying balances on time and keeping cards open for a long time can improve your credit score.

Which cards are the best to close?

While it may be tempting to close older credit cards, the reality is that older credit cards can actually improve your score by extending your credit history. Instead, you should use these cards sparingly while paying off the balance to improve your overall credit rating. 

Consumers who have a lot of credit cards might consider closing one that has a low limit or high-interest rate. These cards are less useful and may not offer as many benefits. You can make a Request to Cancel a Credit Card. This might also be a good opportunity to investigate whether transferring balances to a new card with higher limits and lower rates is appropriate.

There are a number of ways you can manage your credit cards to dispute charges or cancel cards that no longer provide a benefit. Credit card debt is one of the most mismanaged debts, but it doesn’t have to be that way. If you have more questions about managing your credit card debt, reach out to a Rocket Lawyer network attorney for affordable legal advice.

This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.

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