Too Many Credit Cards: Will it Hurt Your FICO?

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abeer
 
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Too Many Credit Cards: Will it Hurt Your FICO?

Postby abeer » Thu Mar 06, 2014 2:45 pm

Hi,
I have heard that having too many credit cards is a bad impression on credit score, so, if someone has 5 cards, but pays on time, and not all five are used every month, then is it a bad thing to do to keep 5 cards? Iknow this is not a FICO forum, but please help me out in this credit card dilemma.. :(


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otter
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Postby otter » Thu Mar 06, 2014 3:49 pm

abeer wrote:Hi,
I have heard that having too many credit cards is a bad impression on credit score, so, if someone has 5 cards, but pays on time, and not all five are used every month, then is it a bad thing to do to keep 5 cards? Iknow this is not a FICO forum, but please help me out in this credit card dilemma.. :(


That's a good question! None of us have seen the algorithm which FICO uses, but if there is any area of the FICO score which factors that in, it would be under "types of credit" which is only 10% of the score. Since most of that part of the score deals with having a variety of credit (installment, mortgage, cards, etc), I would think the raw number of cards open would be negligible. I have heard the cultists on myfico say there is an optimal number (anywhere from 3-8 cards), but there is a guy over there with over 100 cards and a 780 fico score.

A few caveats though:

  • More cards = more inquries. But after 6 months, those inquires won't affect your score much.
  • Some in-house scoring models might score lower if you have too much available credit. Most issuers don't go entirely by FICO. If you have a 780 score, your income is $30,000 and your available credit is $100,000... you're going to make any prospective issuer nervous. Some will decline saying something like "pyramiding debt" is the reason.
  • You can have your current cards closed if you open too many accounts at once. Some issuers like Barclaycard will close you down if you open too many cards too soon after opening an account with them.
In my Wallet:
  • Amex PRG NPSL[3-14, bd 91]
  • Sallie Mae MC $8000[1-14]
  • Chase Freedom $4700[1-14]
  • Discover It $2750[8-13]
  • BoA UCF Alumni Cash Rewards $5000 [3-15]
Sometimes in my Wallet:
  • GM BuyPower WEMC $5000[9-14]
  • Wells Fargo Propel 365 Amex $7000[4-14]
  • Barclaycard Arrival WEMC $7000[3-14]
  • BoA Better Balance $3000[2-15]
In my sockdrawer: Amex BCE $1000[10-13, bd 91], OCCU Duck $10000 [11-13], The Sportsman's Guide Visa $8000[8-14], Chase Slate $4000 [9-14]Delta Gold Amex $2000 [2-15 bd 91], Diners Club MC $20000 [10-14] Commerce Bank Visa $2000 [3-15] Citi Double Cash $1000 [3-15]
Total CL: $90450

abeer
 
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Location: oklahoma city

Postby abeer » Thu Mar 06, 2014 4:14 pm

Thanx alot for you reply, I have another question, actually i just had one card till last december, 2013.. Then I got these new offers all of a sudden, and ended up in having 3 more cards. The good thing that happened was that I paid my university fee from them, but this capital one card that I have is a problem. Its APR is 24.9% and credit limit of 500. I used it last month and paid all the balance today and I want to close it, but scared.. what if it lowers my score? :( I donno why but I am finding it useless now and wanna get rid of it..
CITI bank also gave me their card, but i have not activated it yet, its APR is 0.25% , I wanna activate it and close capital one.. Do you think it's a good idea?? or will it have a bad impact on my score? I don't have any loan on me, but I want to buy a new car by the end of this year.. for that, i need a good credit score... :confused: :confused: :confused:

lennyj17
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Postby lennyj17 » Thu Mar 06, 2014 4:27 pm

It's not how many Cards you have per say, its How many are carrying Balances, How much of the CL you're using, How many are "New" at the same time, and to a lesser extent the Hard Inquiries each on generates.

I have 25 open cards, but only 2 are Balances the Rest are @ 0. My Score is rebounding now from a low of 715 New Account dings (2) and Inquiries, now sitting @ a 720 Fico.

linuxmachine
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Postby linuxmachine » Thu Mar 06, 2014 4:37 pm

I can think of a couple things:

1. if you opened up a lot of accounts recently, it reduces the average age of your credit, which lowers your score.

2. the more cards you have, the higher your overall credit limit. eventually you will reach a threshold where banks aren't willing to give you additional credit. this wont necessarily lower your score but will likely cause a lot of denials when you apply for credit.

As for unused cards, some companies will just close your account if you don't use them at all. Typically store cards will close down after 1 year of no use. I've found bank cards won't close your account as long as you have any active account besides the unused CC. But for others, it's kinda random

thom02099
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Postby thom02099 » Thu Mar 06, 2014 5:47 pm

abeer wrote:Hi,
I have heard that having too many credit cards is a bad impression on credit score, so, if someone has 5 cards, but pays on time, and not all five are used every month, then is it a bad thing to do to keep 5 cards? Iknow this is not a FICO forum, but please help me out in this credit card dilemma.. :(


Good responses from the others.

There is a point of diminishing returns, as has been pointed out. Once you reach what could be considered a saturation point, more cards won't help your cause, and could do harm. It's good to know when and where that point is in your credit journey. There's no set answer for that. One can have 15-20 open cards and not be at that point, or one can have 4-6 card and have reached that point. For each of us, it's different.

As you can see from my signature, I've got a lot of cards. I'm also very happy with where I am and there are neither new cards on my horizon or requests for CLI. If I get them....cool. If not, I can live with what I have. Credit management is not a competitive sport, though you may get that impression on some "other" sites. Set a goal, attain it, and sit back and enjoy what you've accomplished.

EDIT: And to answer your original question....No. And Yes. Only you can define what is too many. If you get in over your head, you've got too many. If your scores are going down and not trending up, you've probably got too many of the toy cards that really aren't helping the cause.

42 accounts on my report and 20 open accounts have helped my FICO scores to where they are today. YMMV.
Retired, and in the process of retiring cards!
EQ = 846 EX=828 TU = 836 as of 02/2016

rockyrock
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Postby rockyrock » Thu Mar 06, 2014 11:53 pm

abeer wrote:CITI bank also gave me their card, but i have not activated it yet, its APR is 0.25% , I wanna activate it and close capital one.. Do you think it's a good idea?? or will it have a bad impact on my score?


Any hit on your score will only be temp. so don't sweat it too much. That being said, if there is no AF on the card I would keep to help with not only your AAOA but utilization ratio. Just stash it in your sock drawer or safe--or whatever.

My experiences, YMMV.
American Express (2005): Green & Blue Cash Everyday
Chase: Freedom & UA Club USAA: Signature Visa & American Express
Discover it Bank of Hawaii Hawaiian Airlines WEMC Synchrony Sam's MC
Navy FCU Platinum Visa Citi Double Cash & AT&T Access MC

rockyrock
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Postby rockyrock » Thu Mar 06, 2014 11:55 pm

thom02099 wrote:42 accounts on my report and 20 open accounts have helped my FICO scores to where they are today. YMMV.


You do have a lot of cards.
American Express (2005): Green & Blue Cash Everyday
Chase: Freedom & UA Club USAA: Signature Visa & American Express
Discover it Bank of Hawaii Hawaiian Airlines WEMC Synchrony Sam's MC
Navy FCU Platinum Visa Citi Double Cash & AT&T Access MC

takeshi
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Postby takeshi » Fri Mar 07, 2014 9:00 am

There's no X that defines "too many" for everyone out there. If you can't reasonably manage X then X is too many. From a FICO scoring standpoint it's generally best to have at least 2 or 3 credit cards reporting. One can certainly have many more. I don't have as many as thom02099 but I have 10 total, have a use for all of them and have no problems with managing them.

If you're worried about your score then consider the usual suspects:
http://www.myfico.com/crediteducation/whatsinyourscore.aspx

As others have indicated, number of cards really doesn't mean much. A lot of hits due to new inquiries and hits to AAoA from new accounts can adversely impact your score. However, to what extent varies depending one one's credit. Generally speaking, a thicker credit profile won't be hurt quite as much as a thinner one.

abeer wrote:I used it last month and paid all the balance today and I want to close it, but scared.. what if it lowers my score?

The major hit from closure is due to the reduction in utilization. While we can't tell you that you'll lose X points you can calculate your utilization before and after to help you with you decision making.

abeer wrote:Do you think it's a good idea??

Your call to make. Good is highly subjective. I didn't see any point in keeping my Capital One rebuilder cards that didn't grow with me but YMMV. Some prefer to see if CO will give them CL's and APR reductions to keep the account age. Just keep in mind that even if you close it the account will still factor in to your AAoA until the closed account falls off your reports around 10 years down the road.

abeer wrote:or will it have a bad impact on my score?

To even guess we'd need a lot more info regarding your credit. What's you individual and overall utilization? AAoA? Are these 5 cards the only credit accounts you have? Are all your inquiries with the same CRA? What's the inquiry count for each CRA and age of the inquiries?

Also keep in mind that since there are 3 CRA's you have a score based on information in your report with each of those CRA's. What the auto loan creditor will see all depends on what they pull. When was the last time you pulled and reviewed all your reports? Do you have any scores?



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