As the founder of this site, one of the most common questions I get asked is how many credit cards is a good number to have. You’ll see answers to this question all over the map.
On one extreme, you have haters like Dame Ramsey saying you shouldn’t use any credit cards whatsoever. I suppose that could make sense… but only if you don’t want the best interest rates on your mortgages and loans (because good luck achieving a high credit score without any cards).
So who’s right? The correct answer is somewhere in between. There is no one-size-fits-all solution, but these 4 pieces of advice will help guide you to the right decision for your circumstances.
1. For starters, know the most important thing
Whether you have 1 or 100 lines of credit, it doesn’t change the fact that the most important part of having a good credit score is your payment history.
35% of your FICO score is based on payment history, which is more weight than any other category (there are 5 total). FICO’s website lists the following things which fall under payment history:
- Credit payment history on different types of accounts
- Public record and collection items
- Details on late or missed payments (“delinquencies”) and public record and collection items
- How many accounts show no late payment
When it comes to building good credit, payment history is far more important than how many credit cards to have open.
2. Look at all your credit accounts
10% of your FICO score is based on your mix of credit accounts. They like to see different types of credit, such as cards, installment loans (mortgages, school loans, auto loans, etc.), retail accounts, and installment loans.
To have a good score you don’t have to have all of them, but it is a good idea to have some diversity.
But what if you don’t have any need for a mortgage or other loans? Well if that’s the case, then having several different credit cards is probably a good idea. I achieved a 760 FICO score by my early twenties using nothing but cards, however I had around 7-10 of them. I would not have had that same success with just 1 or 2 cards.
On the other hand, if you already have several installment loans, then you may not need as many credit cards. You may be able to get by on just a couple, but as a general rule of thumb I would recommend at least 4 or 5 cards (a minimum recommendation based on the experiences shared by forum users on this site).
While it’s true that you can achieve a good score without having any loans, it doesn’t usually work the other way around. This is what FICO’s website says about people who don’t use credit cards:
Despite this advice straight from the source, you still have countless critics like Dave Ramsey saying that credit cards are bad. Well guess what? Indeed they can be used for bad, but the same holds true for most things in life. If you use them responsibly, they can help you.
3. Find the right number you can manage
In theory having more credit cards might help your score… but only if you can manage them properly.
Obviously the more accounts you have, the harder they can be to keep track of. But one of the easiest ways to solve this problem is to only use a couple of your cards at a given time.
For example let’s say you have 10 different cards. If you’re using them all at once, that will be 10 different bills to pay and your spending will be spread across 10 different accounts (good luck budgeting with that!).
But if you have 10 cards and only use 2-3 of them at a given time, it’s just as easy as managing 2-3 accounts. Then once per quarter, you can put those in the sock drawer and pull out 2-3 different ones to use. Rotate every quarter and by the end of the year, you will have used all 10. Having that many active accounts is excellent for your credit score!
On the other hand, if you’re not going to use them in an organized manner like this, having fewer cards may be better because you will be less likely to make late payments. But I have over ten cards and haven’t had a single late payment in ten years, so you can succeed if you put your mind to it.
4. Try and stick with no annual fee cards
If you’re going to have more than 1 or 2 cards, make sure they have no annual fees.
Simply put, when all of your spending is on one card, it might be worth paying for if the rewards are worth it.
However when you have 5 to 10 different cards, you will be spending less on each card. That means the rewards you earning on each account will be less, and hence, less worthwhile to pay a fee for.
The other reason to choose no annual fee cards is because FICO looks at the average age of your accounts – the older, the better. If you have a bunch of expensive fee-based cards, then you won’t want to keep them long term and will probably cancel them after just a year or two. That will bring down your average age of accounts, and hence, lower your score.
But if you’re not paying a fee, then there’s no stress in keeping your cards open forever. I have cards from ten years ago that I absolute hate, but keep them open because of their age. Since I’m not paying for them, why not keep them open since they’re helping me?
So how many should I have?
Based on my experiences, I think the best number of credit cards to have for good credit is at least 6 to 8. But since everyone has different circumstances, ultimately this is a question that only you can answer.