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.
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 actually 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?
This article was originally written or modified on . If you enjoyed reading this post, please consider subscribing to my full RSS feed. Or you can also choose to have free daily updates delivered right to your inbox.