You've Got a Wallet Full of Credit Cards. Is This a Credit Score Disaster?

Credit cards are a great way to make purchases more convenient. Having one credit card is often enough, but different credit cards can serve different spending habits, such as travel rewards cards for frequent travelers. But can you have too many credit cards?

Learn how having credit cards can impact your financial health as well as how many credit cards may be considered "too many" for your circumstances.

How Credit Cards Affect Your Credit Score

Your credit score is calculated based on a number of factors:

• Payment history: This is the biggest single factor, accounting for 35% of your credit score. Although it takes all of your monthly debt payments into account, your credit card payments are key. Credit card companies are the least forgiving when payments are late and quick to report to credit bureaus when that happens.
• Debt-to-credit ratio: Also referred to as credit utilization, this ratio measures your outstanding debt in relation to your available credit—basically, how close you are to the credit limits on all of your credit cards and lines of credit. Your credit utilization counts for 30% of your credit score; although 30% or less is a good range to aim for, the lower your credit utilization, the better it is for your credit score.
• Length of credit history: The longer you've had your credit accounts, the better. People with excellent credit scores have an average age of 11 years for all of their cards. This variable contributes to 15% of your overall score.
• New credit: Whenever you add a new credit account, it can cause your credit score to drop a few points—first when the creditor makes an inquiry on your credit report, then when the account is actually opened. New credit affects 10% of your score.
• Credit mix: The types of credit you have count for the remaining 10% of your score. Credit bureaus like to see how you manage debt across different types of credit accounts, such as credit cards, retail accounts, installment loans, auto loans, and mortgages.

How Many Cards Should You Carry?

The number of credit cards you have and how you use them can have a direct impact on your credit score.

If you're a new credit card user, you can focus on building a credit history with one or two cards and pay off your balance in full each month. Adding credit cards for specific purposes, such as a good rewards program or better travel-related benefits, can also make sense, provided you add them gradually over time rather than all at once. The effects of adding new cards is minor compared to your payment history and credit utilization, however.

If you've used credit cards for several years and sometimes carry a balance, it may make sense to add a card if it has a significantly lower interest rate. You may also want to transfer a balance to a new card that offers a promotional 0% APR for new cardholders. However, you still need to focus on keeping your debt-to-credit ratio as low as possible.

In general, it's often good to have a primary card that you use for most spending and maybe one or two as a back-ups or for specialized purposes (such as for a particular spending category that is rewarded with extra bonus points).

How Many Credit Cards Is Too Many?

If you think you may have too many cards or have some you no longer use, you may be tempted to start closing accounts, but consider the impact on your credit score. Closing older credit cards can eventually shorten your credit history, which can hurt your score.

Payment history on closed accounts eventually falls off your report, which can also hurt your score. Closing credit card accounts also reduces your amount of available credit, which can hurt (i.e., increase) your credit utilization ratio if you have outstanding balances.

It's better to leave your credit card accounts open and just put these cards away, unless you're paying annual fees. If you get a warning about inactivity from the card issuer, use that card now and then to prevent the account from being closed. You can also keep that credit card as a backup, especially if it comes with a higher credit limit.

Another option for an older credit card you no longer use—and may have gotten when you were just starting out and didn't have many choices—is to ask the issuer about trading up to a better product, rather than closing the account outright.

Frequently Asked Questions (FAQs)

The Bottom Line

Having a lot of credit cards can hurt your credit score under any of the following conditions: 

• You are unable to keep up with your current debt.
• Your outstanding debt uses up a lot of your available credit; more than 30% utilization is best avoided.
• You added too many cards in too short a time.
• You lack diversity in your credit accounts (i.e., you don't have other types of credit in your name like a mortgage, auto loan, etc.).

But don't simply start closing accounts just to reduce the number of cards you have. Although it may prevent you from spending, it's not likely to help your credit score. Instead, pay off any outstanding balances and plan to at least hold on to the oldest card. Store it in a safe place other than your wallet. Then just use it once a year or so to keep it active and investigate options for trading it in for a better card with that issuer.