How Many Credit Cards Are Too Many?

So the other day, I got my free FICO score from myFICO (I have updated that post from September with procedures on how to get the free score and how to cancel the free trial, both very easy). While I was quite pleased with my score, 793 on November 16th, there were a couple of things that I was very happy about. First, it was quite disappointing to see that I actually didn’t join the 800 club as I thought I did. The main reason was some most recent inquires and new accounts related to our house purchase. There were two inquires from the mortgage company, one for the original loan and the other for the refi and two new mortgage accounts since April. Apparently, all these new activities hurt my score, even though it’s unclear by how much. If without these new inquires and accounts, I imagine that my score could have easily gone over the 800 mark for real.

Free FICO credit score

Then, it was the total number of accounts. As I was going through the free Equifax credit report that came with the score, I noticed that as of now there are 35 accounts on my report, down from 38 a year and a half ago. Of those 35 accounts, 18 have Credit score red flagactually been closed already, but they will stay in the report for a while. Along the total number of account, there is a red flag, an indication that the large number of accounts I have actually hurts my score.

A few years ago, when I was actively playing the credit card arbitrage game, I got more cards than I needed (4 in 2006 and 3 more in 2007) just to get the free many from the banks. And after watching my score increased steadily over the time, I concluded that the number of new accounts and the total number of accounts don’t matter too much (according to FICO, 10% of the overall credit score is determined by new credit). If there are negative impacts on credit score, they will only be temporary, as long as I pay my bills on time every time. Therefore, I never really paid much attention to the number of cards I own. That said, I did close many accounts that I no longer need in recent years and haven’t opened any new card since 2007. But I guess FICO doesn’t exclude closed accounts when it does the calculation.

I dug a old Equifax report from 2007 , and there was red flag even though there were 39 accounts back then, so I thought this must be something quite recent. Since official FICO document on credit score doesn’t include the total number of accounts as a factor that determines credit score (payment history, amount owed, and length of credit matter the most), any negative effect it has on credit score is likely to be very small. I am not really concerned about that number because it will get smaller every year as those closed accounts will eventually disappear from the report. However, that little red flag got me thinking the questions of how many credit cards are considered too many and whether there is a threshold which once crossed will plummet one’s score.

To me, though I have about 17 active accounts, only five of them (1 AMEX, 1 Chase, 1 FIA, 1 Citi and 1 mortgage) carry a balance, so I can still manage those accounts very well to not to get into any trouble.

Are you concerned about having too many credit cards? If so, what’s the number that you consider too many? 5, 10, or 20?

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5 Responses to “How Many Credit Cards Are Too Many?”

  1. Briana @ GBR |  Nov 19, 2010 at 1:13 pm

    I was wondering the same thing. There’s some accounts I’m looking to open in the near future (a mortgage being one of them) and I wanted to know if there a “magic number” to either be at or not go over. I have less than 2 handfuls of accounts, and my credit is still fairly new, but then again, I’m still quite young, so I have plenty of time to acquire these accounts.

    I was also wondering because even if you don’t use those accounts very often, doesn’t the credit limit factor into your DTI ratio?

  2. Credit Cards Canada |  Nov 19, 2010 at 1:21 pm

    Wow. 38 accounts. That is a lot, even if almost half are closed…which still means 20 open accounts. I wonder how many are typical?

  3. Sun |  Nov 19, 2010 at 2:03 pm

    My guess is about 10, maybe a little less. A few credit cards, a mortgage, a car loan, etc.

  4. David |  Nov 20, 2010 at 11:49 am

    Well there is no cash prize for having a credit score over 800.

    There very well can be a cash price for having a score under 800 if it’s under 800 because you made money by lowering it.

    Clearly 38 accounts isn’t hurting you relevantly, since your score is still as high as you need it to be. I’ve had a gazillion inquiries over the last year (for bonuses) because I didn’t think I’d have much of a need for a high score for a while. An opportunity to refinance was a surprise to me, but fortunately my score stayed in the mid 700s and still qualified for me the top rate.

  5. Best Debt Management |  Sep 27, 2011 at 7:14 am

    35 credit cards is so much and if all are active then how can you manage these. I agree with @sun that some credit card is for house loan, car lone and so on. If a person has so many card how can he pay their bills and also have no debt?