How many credit cards are too many? Link to Article

Here's a topic that has, to my knowledge, been brought up as an aside in several different related threads, but I do not believe it has ever been discussed in its own topic. While perhaps the information found here is basic to seasoned FWF'ers, many new members (if recent experience is any indication) may find a lot of basic answers here.

How many credit cards is too many?

This was actually a good article. One of the few that actually have sound advice. Although most of regulars arounds here know this stuff, I quoted some of stuff that many of us repeat over and over (but no one listens!).

I am not sure about -20 for opening a store card though.

Steve Rhode, president of Myvesta, a nonprofit consumer-education organization, agrees, saying that each time you open a store credit card, 20 points are taken off of your credit score because, he says, "Historically, store credit cards are issued to anyone with a pulse. They issue credit cards to people who otherwise can't get credit."

Another rule of thumb to remember is to keep your debt ratio under 50%. If your credit card has a $5,000 limit, don't carry a balance of more than $2,500.

"Keep credit purchases under 50% of the credit limit. (If you have a) $5,000 limit -- and you want to buy a $4,000 furniture set -- split the purchase onto two cards," says Williams. She says that creditors don't like to see a card almost maxed out; they look at you as a risk, someone who is using too much credit and has trouble paying off debt.
.

Make your payments on time. One late fee or even two can really bring down your credit score and increase the rates on your other credit cards. You are the only person responsible for payment.


Do not run up your credit. Ideally, you should keep your balance low -- less than 30% of your credit limit on each card.
Some debt advisers also warn not to close too many cards at once. It will cause your debt-to-credit ratio to fall. For example, if you have $10,000 of potential credit and a $5,000 balance, you are using 50% of your potential. If you shut down a card with a $2,500 balance quickly thereafter, you will have $5,000 of debt and only $7,500 of potential, upping your ratio to 67%.

I keep hearing this all the time, that to start building your credit you should
open up a store account. But when I was starting, I tried to open a Sears account,
and would not get one, due to the lack of previous credit.

Maybe it's Sears, and I should've tried someone else, but isn't a secured credit card
better in that you'll be more likely to get approved?

BigBucksNoWhammy said: Here's a topic that has, to my knowledge, been brought up as an aside in several different related threads, but I do not believe it has ever been discussed in its own topic. While perhaps the information found here is basic to seasoned FWF'ers, many new members (if recent experience is any indication) may find a lot of basic answers here.

How many credit cards is too many?

nice article, bigbucks...

try Dicsover Card for start. It has more liberal credit requirments. I opened it when was in the country for only 2 month. Then u gona get 10 new offers a week...

didYOUsearch said: check the CC faq in the sticky, there have been prior threads on this topic

Of course, you could argue that there are not many general use topics left that haven't been brought up at some point in this forum. Finding them quickly and easily, however, is another thing altogether, especially for those new to the forum. On the flip side, I would argue that a perusal of the sticky does not readily show much on this particular subject other than What is the optimal number of credit cards to have open at a time? (in relation to credit rating) and that brief thread is more chit chat and show and tell than anything nearly as informative, comprehensive and authoritative as the article shared in the OP here.

The purpose of posting was that these types of questions seem to be asked with increased frequency of late by new members who haven't read the sticky. Count the number of times you yourself has had to police and chastise those who were unaware or unwilling to read the FAQs. No offense, but sometimes I get the sense (as I bet you do too) that you are a broken record no one is listening to. Rather than face the demand to repeat this info, as reckner77 has pointed out earlier, it seemed appropriate to just send those interested straight to this very useful and well written article where they can get the information they seek quickly and painlessly.

Beyond this, I'm not certain that having monstrously long threads in some cases (many times 3/4th or more of which are useless and annoying clutter posts) is a good thing, and that forum-goers are rather better served if thread topics are renewed and refreshed every couple of years. Times do change as do many policies of banks, credit card issuers, and other financial institutions over the years. After all, who wants to wade through dozens or more pages of outdated, misinformed, irrelevant, or otherwise useless posts (for example, the several pages of posts about receiving a hat in the ED thread) in the hopes of gleaning scattered tidbits of actually useful information? Most readers, I'd wager, don't have that kind of time, even if they have the inclination.

It is no wonder to my mind why some rather risk suffering your wrath to get an answer by posting their question. I think it would be wise to consider overhauling the FAQs thread to condense those current FAQs threads into concise, comprehehsive single informative posts that would much better perform as "quick and ready references" to this forum's most frequently asked questions. There is a possible reason they are the most frequently asked: because the threads in the current FAQs are too cluttered and need to be edited for content, shortened, or otherwise revised to become the convenient and effective references they're supposed to be. Perhaps in addition to "didYOUsearch" police we should have a "you'reOFFtopic" police? After all, look how easy it is for threads to get off topic, present company not excluded?

Well would you look at that, this really turned into a somewhat of a rant there at the end. I blame the heartburn and indigestion that kept me tossing and turning most of last night.

edit: the last time the CC FAQ was updated was May 2, 2004.

Two members brought this up in that thread.

Date Posted: Apr/30/2005 10:56 PM

Get busy. This thread should be current.

Thanks

Walpoc

And

Date Posted: Apr/30/2005 2:17 PM

The best reward thread is a little out of date, I would open a new one with all the new credit cards with rewards that are out there but don't want the repost police to come a knocking.

chrsb

FWIW.

This article is a bit more on target than the usual anti credit card rants. Though the same old:

"Credit agencies warn that the more cards you have, the bigger risk you carry for racking up debt and damaging your credit"

still is the same frame of mind that most people needing saving from themselves.


I bet that people with fewer cards-generally because they can't get more or because they don't trust themselves with more- are more likely to go into debt.

As far as scores go, it's always YMMV.

NOT TRUE.I do not see why i need more than 4 credit cards for personal use. I could get more, but i do not need them. And the credit score has nothing to do with it, just keep your balance below 25% (of your total credit on all cards) and you will be fine!

The problem is that there are to many irresponsible people in this country. from the average "Joe" with 10 maxed out credit cards to the "smart guy" in white house with the LARGEST DEBT in the world!

wow store credit cards are THAT bad for your credit score?

I opened a Macy's card like four or five years ago, then I never used it again. Is it still active? should I call them up and close it?

The store credit cards give me the most headaches. My family members often go shopping and open new store credit card accounts (to get discounts) without my knowledge. Then I receive bills out of the blue and often forget to pay them (not in my billpay system).

Is there anywhere I can find out just how many open and active credit cards I have? My credit report doesn't seem to list them all. Can they reappear?

I had no idea that store credit cards are rated differently than major ones. I find it hard to believe that they "give to anyone with a pulse". I have a friend with great credit (700+) that got denied the Home Depot card twice within a few months after closing on a new mortgage.

Good thing I've never found a use for a store credit card though.

Good points Dave, on both subjects.

Back on topic, found this in article on CNN Money, but will only qoute here:

There is no magic number for how many credit cards are too many, said Fair Isaac's Cheri St. John. But, if ratio of credit used to credit available is high, that indicates higher risk. "Clearly consumers want to keep balances below the available credit line," she added.

Would have been nice if Cheri gave a figure for "how low" below the available CL is idea. I've seen figures now from 30% to 50% to 90% and would still like to have some definitive answer on which is "ideal." I suspect that this is one of those "too many variables" to generalize accurately things. Would also be nice to know what the "penalty" in points are for different levels of utilizations.

So more enigmatic clues to the ever elusive answer:

FICO stands for Fair Isaac & Company, and credit scores are reported by each of the three major credit bureaus: Experian, Equifax, and Trans-Union. The score does not come up exactly the same on each bureau because each bureau places a slightly different emphasis on different items. Scores range from 365 to 840.

Some of the things that affect your FICO scores:

Delinquencies
Too many accounts opened within the last twelve months
Short credit history
Balances on revolving credit are near the maximum limits
Public records, such as tax liens, judgments, or bankruptcies
No recent credit card balances
Too many recent credit inquiries
Too few revolving accounts
Too many revolving accounts


Again, what I find interesting is the last two items on the list: Too few or too many accounts. What are the guidelines for what is or is not considered "too many" accounts? Surely it is not the same for everyone otherwise they would just come out and say a number. It must have a connection to the myriad of other variables unique to each individual's history and current credit position. If there was only a way to figure out what constitutes "too many" in the case of accounts opened, credit inquiries, etc.

EDIT: Found some additional info that confirms my suspicion:

For some people, a given factor may be more important than for someone else with a different credit history. In addition, as the information in your credit report changes, so does the importance of any factor in determining your score. What's important is the mix of information, which varies from person to person, and for any one person over time.

That comes straight from www.myFICO.com

Also of interest:

For many people, one additional credit inquiry (voluntary and initiated by an application for credit) may not affect their FICO score at all. For others, one additional inquiry would take less than 5 points off their FICO score.

Inquiries can have a greater impact, however, if you have few accounts or a short credit history. Large numbers of inquiries also mean greater risk: People with six inquiries or more on their credit reports are eight times more likely to declare bankruptcy than people with no inquiries on their reports.

So at least we have a closer figure for what constitutes "too many" recent inquiries, if we settle for "more than 6". Something to consider when contemplating an app-o-rama!

great information

SUB said: One thing I don't really understand is the 50% ratio - is it per card, or overall? As an example:

I have one card with $1000 CL and a $1000 balance - utilization is 100% (assume no interest), and another card with $10k CL and $0 balance. Overall, the utilization is $1000/$11k ~ 9%. Would the score be affected negatively by this?

See What's In Your Score under the subheading, "Amounts Owed." I interpret that list to include both per card and the aggregate.

ttllkktt said: If store credit cards were opened for a long time, would it be good to close them?no. read the CC Faq. You dont close accounts.

Citi took over all Sears cards, the store-only Sears credit card and the Citi Sears Mastercard are both operated by Citi

Googler said: didYOUsearch said: ttllkktt said: If store credit cards were opened for a long time, would it be good to close them?no. read the CC Faq. You dont close accounts.

A lot of experts say the opposite as well, and say not to keep unused lines open. sorry they dont know what they are talking about. Choose to believe who you want.

Its safe to say me , DaveHanson, and some other FWers have far more actual, real world experience than any "expert" . This is financial myth #2

But dont believe us and our real world experience, Heres an article that addresses the "closing accounts" myth
http://moneycentral.msn.com/content/Banking/Yourcreditrating/P41876.asp

BigBucksNoWhammy said:
I can only assume that ignorant people assume that by closing accounts it rectifies the "too many open accounts," while it reality it doesn't quite work that way. That you might have "Too many open accounts" is a proactive warning to not open them in the first place, not reactive advice to close down those you already have. excellent comment

None of us know the "magic algorithm" However, if one sees many credit reports some things become obvious.

For instance: I have observed that on reports with very high mortgages (700K or higher) there seems to be an *allowance* for more cards (in other words, little or no ding as long as utilization is less than 50%)

There is also a benefit to having 1-2 dept store cards, especially ones with high limits and long histories.

The algorithm is based upon data collected over time. FI, "customers who run their cards up to their limits more frequently default" or "customers who pay off a student loan rarely default". It is so complex, however, that a single activity perceived as "risky" can trigger a rapid decrease (any collection, new delinquency, etc).

It is not only the credit "experts" who give confusing advice. Read the reason codes from my recent tri-merge:
• There are too many bankcard accounts on your credit report. [TransUnion] Having too much available credit can sometimes harm your credit score. Lenders may feel that you have the ability to spend more than you could potentially pay back. You might want to consider closing a few accounts or asking to have your credit limits reduced. Avoid closing too many accounts - especially the oldest accounts on your credit report - because it could harm your credit score. Closing the oldest accounts can damage your score by making the length of your credit use appear shorter.

and • Not enough revolving debt experience. [Experian,Equifax] A healthy balance of credit and loan accounts is key to achieving a high credit score. It is important to build a record of responsible credit use over time with different types of accounts. Consider opening a new account to strengthen your credit report and improve your score.

At least that advice was given by different bureaus!

You all made me curious so I went and just ran my credit report w/fico. I have 40+ accounts (about 10 satisfied and closed) listed on my credit report and my fico is 805. I think maybe it has more to do with how you treat the credit than how many open/close you have?