Your credit score is an essential component of your overall financial health, so it’s important to make sure you don’t do anything that could damage it. If you always make your debt payments on time and keep your credit card balances low, your score will generally be in good shape.
Having multiple credit cards won’t necessarily hurt your credit score — and, in fact, it can sometimes help. But if you have more cards than you can handle or use them irresponsibly, your score could drop considerably.
How Having Multiple Cards Can Impact Your Credit
To understand how carrying multiple credit cards can affect your credit score, it’s important to know how your score is determined. Your FICO score, for example, is broken down as follows:
- Payment history: 35%
- Amounts owed: 30%
- Length of credit history: 15%
- Credit mix: 10%
- New credit: 10%
Now, let’s break down each of those in terms of how using multiple credit cards has the potential to hurt your credit score.
Making on-time bill payments is the biggest factor in your credit score. In an ideal scenario, you’d never miss a payment on your credit cards. But it’s unlikely that all of your cards will have the same due date. And if you have more cards than you can manage, you can set yourself up to forget a payment.
But while that’s a danger, there are ways to prevent it from happening. By setting up automatic payments on all of your accounts, for instance, you can ensure that you’ll never miss one.
Even if you do, credit card issuers typically don’t report late payments to the credit bureaus until after you’ve been late for 30 days. So if you miss your due date but remember to pay the next day, it won’t show up on your credit report; the only consequences will be a late payment fee, interest, and possibly an increased penalty APR.
This factor is essentially based on your credit utilization, which is your credit card’s balance divided by its credit limit.
The lower your credit utilization ratio on each card and across all your cards, the better. So in this case, having multiple credit cards can actually help your score by increasing your overall credit limit and spreading out your balances across multiple cards.
For example, let’s say you have one credit card with a $3,000 balance and a $5,000 credit limit. Your utilization rate on the card is 60%, which would negatively impact your credit score.
If, however, you have three cards with a $1,000 balance and a $5,000 limit on each, your utilization drops to 20%, which is generally much better for your credit.
Length of Credit History
This factor considers how long you’ve been using credit as well as the average age of your accounts. The more new credit card accounts you open, the lower that average will be.
But while that sounds bad, remember that your length of credit history only makes up 15% of your credit score. And since the average age of your accounts isn’t the only component of your history, the impact may not be very noticeable.
Lenders typically like to see that you can manage various types of credit. And credit scoring models perceive installment debt — such as a mortgage, student loan, or auto loan — as less risky than revolving credit card balances.
Having more than one credit card account may help improve your credit mix. But according to FICO, this factor isn’t crucial in calculating your score unless there’s very little other information in your credit profile.
Every time you apply for a credit card, or any other credit account for that matter, that’s considered new credit, and the lender may run a hard credit check.
According to FICO, each new hard inquiry can knock up to five points off your credit score, but many scores won’t be affected at all. Even if your score does drop slightly, it’s not a permanent drop.
Where this factor could make a difference is if you apply for multiple credit cards in a short period of time. Not only could multiple inquiries have a compounding effect on your credit score, but it could also be a red flag for lenders.
So as long as you space out your credit card applications and use credit responsibly in general, you likely won’t see a compounding effect on your credit score.
How Many Cards Is Too Many?
So is it good to have multiple credit cards? Well, we can safely say it’s not bad. Using more than one credit card for your everyday spending has its benefits: For instance, using cards with different rewards programs can help you maximize how much you earn.
What’s more, some credit cards offer benefits that other cards don’t, and having more than one in your wallet can ensure that you can take advantage of all the benefits you want.
There’s no universal answer to the question of how many credit cards is too many, because everyone is different. If you have good organizational skills and can easily stay on top of your card management, you’ll likely know when one more is too much.
But if the idea of keeping track of more than one or two cards gives you anxiety, it may be better to restrict how many you keep in your wallet. And if you struggle to contain your spending, having no credit cards at all may be the best strategy for you.
If you want help with managing multiple credit cards, here are a few tips:
- Use budgeting software that allows you to see transactions and balances in one place.
- Keep a list of your monthly due dates and when annual fees are due, if applicable.
- Consider waiting until you have an established credit history before you apply for multiple cards.
- Be honest with yourself about your capacity for card management.
- Get rewards credit cards that align well with your lifestyle — whether you spend more on travel and dining or groceries and gas — so you can maximize the value you get out of them.
The Bottom Line
Getting multiple credit cards won’t hurt your credit score if you use them responsibly. But the more cards you have to keep track of, the more likely you may be to forget about a payment – so there can be consequences if you have trouble staying organized or with overspending.
As you consider whether it’s a good idea for you, think about why you want to have multiple cards and what your strategy is for managing them responsibly. Because if you do it right, you can take advantage of all the benefits your cards have to offer with very few drawbacks.
Learn more about your credit: