A credit card can be used to establish credit if you have at least one open card that can be reported to credit agencies. Beyond that, there is no specific number of cards you should carry in your wallet to maintain good credit.
Having credit cards directly impacts your credit score, but the number of cards you have isn’t a determining factor. You should focus on how you use them instead of how many you have. Remember: for more tips on how to improve the quality of your life, visit www.credithealing.org.
How do Credit Cards Affect Your Credit Score?
It can’t tell you what your credit score is based on how many cards you have in your wallet. No matter how many cards you have, you can have poor credit or excellent credit. Instead, focus on the way you use your cards.
Manage Your Credit Utilization Ratio
The credit utilization ratio is the amount of available credit you are using. Your credit card utilization is 80% if you have a $10,000 credit limit and an $8,000 balance. Too high a utilization rate can negatively affect your credit score and act as a red flag for potential creditors. In general, it’s recommended to keep your utilization at 30% or less across all cards.
As long as you don’t overuse your new card, opening a new credit card can boost your utilization by increasing your available credit. You should keep in mind that credit applications can result in hard inquiries that damage your credit score, though the damage shouldn’t last too long.
If you consistently pay down your balance on time and have no trouble managing your debt, opening a new credit card to increase your utilization may be a good idea. However, if you have trouble managing debt or paying bills on time, a new credit card probably isn’t worth the risk.
Manage the Age of Your Accounts
Another important factor when it comes to credit cards is the age of the account. Credit scores are better if your credit history is long and stable. It is possible to calculate your credit score based on the age of your accounts, including your oldest credit card and your newest one. The older the accounts, the better.
Keeping your credit cards open and active is a good strategy, but it doesn’t mean you shouldn’t close old cards. The temporary hit to your credit might be worth it if you have high fees or poor customer service on the card.
Make Your Payments on Time
Keeping your credit score high requires you to pay your bills on time. You don’t have to worry about how many credit cards you carry in your wallet if you make all your payments on time. However, if you are having trouble making payments on all your cards, it might be time to close a few.
Should You Open a New Card?
Many good reasons exist for opening a new credit card if you pay your bills on time. A lower credit utilization rate, earning rewards or transferring a balance to a lower interest card are all solid reasons for opening a new card.
Pay your bills on time, keep your balance low, and avoid overextending yourself financially. Do not apply for another card if you believe it will prevent you from managing your credit effectively.
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