How many credit card should I have?

11 comments

1. 

   Smoovy Loco on July 28, 2009 at 8:02 am

   Credit card use in the U.S. is growing, with 14% of Americans holding more than 10 cards, a survey by one of the giant credit-reporting agencies has found. That’s up from 2004, when 10% had more than 10 cards.

   The study, released today by Experian, identified two groups of heavy card users: the 14% who own more than 10 cards and another, at times overlapping, 14% who use more than 50% of the credit available to them. This last group alone holds an average of nearly seven cards each, two more than in 2004.

   The study was done by randomly selecting and analyzing 3.2 million of the roughly 215 million credit files in the company’s gigantic database, said Pete Bolin, Experian senior analyst.

   Among the findings:

   51% of Americans who have established credit own two credit cards, up from 49% in 2004.
   The average American holds four credit cards, up from 3.2 in 2004.
   The average credit score nationally dropped to 674, from 678 in 2004.
   The average score for those who use at least 50% of their credit rose to 645 from 631 in 2004.
   Fewer Americans — 14% — are using 50% or more of their available credit than in 2004, when 16% did. These high users have credit scores about 30 points below the national average.

   Experian used its own credit score calculations, producing what it calls a PLUS score, in reporting results. It is one of numerous scoring systems developed by banks, lenders, credit-tracking companies and Fair Isaac, which created FICO, the most widely used score. All gather data on borrower behavior from credit reports to produce scores that lenders use in granting loans and setting interest rates. (You’re entitled to a free copy of each credit bureau’s report on you each year; visit. Typically you will have to pay to see a credit score, though.).

   In New England, credit card use is heaviest, yet credit scores are highest. The typical New Englander holds five credit cards, compared with lows of 3.3 in the Southwest and 3.9 in the Pacific and Mountain regions. Yet, New Englanders who use more than half of their available credit maintain an average credit score of 651, higher than any other region. Nationally, the average score for such big consumers of credit is 674.

   Typically,” Bolin said, “the higher the utilization, the lower the (credit) score.” In New England, he could only conclude, “they are paying their bills on time, so their credit scores are not suffering.”

   Bolin declined to say how many credit cards constitute a problem, since an individual’s credit score can include as many as 20 or 30 factors, Bolin said.

   Card companies hungry for profit
   To Robert D. Manning, author of “Credit Card Nation” and director of the Center for Consumer Financial Services at Rochester Institute of Technology in New York, the Experian findings are evidence of the aggressive, hugely profitable growth of the credit card industry. They somewhat reflect the growing subprime credit industry whose cards typically have extremely low credit limits, forcing many buyers with poor credit to purchase numerous high-fee cards to borrow the money they want, he said.

   To shake out high-risk borrowers and give investors and regulators a clearer picture of the banks’ risk exposure, the federal Office of the Comptroller of the Currency is now pressuring banks to raise cardholders’ minimum payments to 4% from 2% of credit card balances; debt-laden consumers will soon start feeling the pinch, said Manning.

   If you’ve got three or four credit cards and are not in a short-term emergency after which you will pay them right off, it’s time to ask yourself if you are using credit cards “to inflate your lifestyle,” said Manning. As for credit limits, anything over 65% use is viewed by credit-scoring agencies as “a negative,” Manning said.

   Don’t carry the debt month to month
   “Any credit card debt carried month to month is a danger signal,” warned Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School and co-author of “The Fragile Middle Class: Americans in Debt.” “It means that a family isn’t living on its income.” Plus, card interest and fees just inflate the cost of every purchase you make.

   “Ten credit cards?” Warren asked. “That’s just plain nuts.”

   Bolin, from Experian, offers these tips for boosting a score:

   Before closing credit cards, calculate the effect on your balance-to-limit ratio. (Calculate your ratio by checking each account for the percentage of your credit limit you’ve used.)
   Vary your loans — examples: an auto loan, mortgage loan, installment loan and equity line of credit — so that lenders see you can handle credit well in a range of situations.
   Make payments on time.
   Limit your use of available credit.

2. 

   danxtsupamodel on July 30, 2009 at 7:00 am

   I had a total of 8 credit cards the day after I graduated highschool….and now I don’t have any….reason being I was stupid and maxed them all out…then it took me years to pay off them.. so I just decided that I have 2 bank accounts and I have those debit cards through them…that way if I want to purchase somehting I will actually have to have the money in my account to get it….but my husband has 4 I personally think you should have 2….

3. 

   investor on August 2, 2009 at 9:41 am

   When the credit cards are more than 6 months old it is a better to have 10 than 2.

4. 

   Cory Z on August 5, 2009 at 8:53 pm

   I only have one with a really high limit that I just use for everything. Visa is everywhere you want to be…there is no reason to have anything else.

5. 

   beauty s on August 6, 2009 at 6:47 am

   The most is two, u don’t want to be in debt

6. 

   mikey on August 8, 2009 at 1:01 pm

   You should only have as many as you can pay off every month. If you are carrying a balance month after month, you are just paying more for everything you’ve bought.

7. 

   spifiman1 on August 10, 2009 at 7:25 am

   It really doe’s not matter how many you have, what matters is how you manage them.

   I had 14-credit cards at one time and had great credit because I paid them if full every month.

   To have the best credit score and profile you need 3 credit cards with less then 30% of your credit limit used and 2 installment loans all with good long pay history’s.

8. 

   Mia on August 13, 2009 at 7:18 am

   If you are just starting in your credit history I would just keep it to one card and MAYBE a store card like Macy’s or something, that is if you can afford it. I started with one card and went on a shopping spree at 18 years old. Then, I got more card. My credit is still recovering. I don’t have bad credit anymore, but far from great. Don’t mess up your credit to learn that lesson.

9. 

   dzwreck on August 15, 2009 at 9:26 am

   According to numerous credit and credit scoring classes that I have taken over the years, the ideal number of credit cards to have for maximum credit scoring is between 2 and 4 credit cards. The age of these credit cards, the payment history and the balance to limit ratios will determine a big part of your credit score. Keep your balances on each card, ideally below 40% of the limits and make your payments on time. Do not close them out and take out new credit cards if something better comes along because the longer an account is open with a satisfactory history, the better off your credit score will be. Read the blog below on credit and credit scoring. It talks about everything mentioned above and more.

10. 

    biwagirl20 on August 16, 2009 at 7:52 am

    NONE
    ZERO
    Pay Cash
    Stay out of Debt
    Credit Cards are the Devils Tools

11. 

    moviegoer_j on August 17, 2009 at 5:23 pm

    That depends on why you’re asking the question. Let me explain:

    If you’re trying to maximize your rewards from using credit cards, then it depends on how much extra you could earn by managing another card. You can use this rewards calculator to see how much you can earn in rewards from 1 card, 2 cards, 3 cards, etc.:

    Then you can decide where the reward/hassle tradeoff is for you.

    Now, if you’re trying to maximize your FICO credit score (because mortgage rates and insurance rates depend on it), then you’ll probably want to have extra credit available to you that you’re not using. The reason is that 30% of your FICO score is based on the amount of the available credit to you that you’re using. Using a higher percentage of your available credit is worse. So, having a few extra credit cards with nice credit limits that you barely or never use, will reduce your utilization, which will increase your FICO score. You can read all about the gory details of how FICO scores are calculated in the recent blog entry here:

    Hope that helps.