|
|
|
Is having a lot of credit cards, but only using them sparingly, bad for your credit?
|
Doug G wants to know:
I’ve opened a few credit cards lately, but don’t plan on using them, only for emergencies. Will just having 4 or 5 credit cars available for my use somehow hurt my credit score, or credit in general for future loans I might want?
I’ve opened a few credit cards lately, but don’t plan on using them, only for emergencies. Will just having 4 or 5 credit cars available for my use somehow hurt my credit score, or credit in general for future loans I might want?
Tagged with: Bad Credit • Credit Loans • Emergencies
Filed under: True Credit
Like this post? Subscribe to my RSS feed and get loads more!
Not that bad – but it will affect your score whether you are on time on paying. It could make your score low. So get a scissors and cut your cards in pieces – but – leave one or two that is your favorite to use. Lenders don’t like that people have so many open accouts, that is why they offer loan consolidation. meaning you put all your loans into one account only and you will be rewarded.
It can be bad, If you are looking to buy a house, The lender could see all those cards as liability. At any time you could potently go out an max those cards out. Really what is the point of having that many cards. Two cards is plenty, pay themoff at the end of the month.
earth angel is completely false. never close an account because you dont use it. That will hurt you in 2 ways. The ratio of your total balances to your total credit limit makes up 30% of your score. For example if you have 2 credit cards with $5000 limits and you have a $2500 balance on each and also have two unused accounts with $5000 limits then you are using $5000 of your $20000 or more importantly 25% of your total available credit. Now if you close the two unused accounts then you only have $10000 of available credit and still have a total balance of $5000 so you are now using 50% of your total credit limit instead of 25%. This will drastacally hurt your score. Even if you have low balances closing accounts will still hurt your ratio. The other way it can hurt your score is if you close your oldest account. Ill explain how and why in the last paragraph.
It is also a misconception that having several credit cards hurts your score. This just isnt true, on the contrary if you can successfully manage several credit cards then it proves that you can handle large amounts of credit and will improve your score and chances of getting approved for future credit. Having several different types of open accounts is good too, for example- department store cards, cars loans, major bank credit cards, installment loans, and one gas card.
Keep all your cards open and use them wisely. Dont use more than 30% of your limit on any card and always pay on time. It is not really good to have unused accounts (even though it is still much better than closing them) so try to use your cards to pay for things you have to buy anyways like gas, groceries and utility bills. With time your score will go way up even if it is already fairly high.
The only thing you are doing that will temporarily hurt your score is that you opened so many accounts at one time. The average age of you credit accounts is a factor in your credit score so when you open several accounts all at once it pulls down that average. Also opening several accounts at once makes you look like you are desperate for credit which will also temporarily hurt your score, although the negative impact from this is likely to be offset by the fact that your ratio of total balances to total available credit will have improved.
Scott F is right on it, but most lenders look for 3 open active trades, for example a car and two other credit cards. Keep the ratio balance (30%) he suggests on the credit cards. Most importantly, pay on time.