If you're trying to build credit or boost your
credit score you might be wondering if there is an ideal number of credit cards
to have. The truth is there is no perfect number. However, there are factors
you should keep in mind when deciding how many credit cards to have.
Your credit score is calculated by looking at
five categories, each with varying levels of importance: your payment history
(35%), credit utilization (30%), the length of your credit history (15%),
new credit (10%), and type of credit used (10%). The first two categories carry
the most weight, so focus on getting those percentages as low as possible.
Since payment history makes up 35% of
your credit score, make sure you always pay your bills on time. That can be a
challenge if you have multiple credit cards with different due dates. To ensure
you pay all your bills on time, set alarms or schedule payments so that each
one arrives before the due date.
Your credit utilization ratio shows how
much of the total available credit you've used. To figure out your utilization
ratio, first add the balance on all your credit cards. Next add the total
amount of credit you have. Then divide your total balance by the total credit.
Multiply that by 100 and you have your ratio. To improve your credit score, try
to keep that ratio under 30%.
Using multiple cards can also make it harder to
keep track of how much you're spending. Set balance alerts on your cards so you
don't exceed a specified percentage of the card's available credit.
Rewards cards, which either give you cash back,
points for merchandise, or airline miles, generally have higher Annual Percentage
Rates (APRs) than other cards, so if you can't pay the balance on these cards
in full every month, it's best to keep just one or none at all.
If you're a full-time student thinking of
getting your first credit card, shop around for a card with low interest and no
annual fee. Be disciplined and use the card for emergencies only. Then always
pay your bill on time.
Some cards offer initial low rates if you
transfer your balance from another card. If you do that, leave the older
cards unused and pay off the balance on the newer card quickly. The cards with
no balances help keep your utilization ratio low.