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How Many Credit Cards are Too Many?

August 27, 2012 13 Comments

There comes a time in your life when you need to make a big purchase such as buying a house to raise your family, or for investment purposes. Going to big name lenders is usually the way to go when looking for capitals to buy your dream house. Here you are knocking on lender’s doors asking for a loan and hoping you’d get it.  One of the many important things that lenders look for is your debt-to-income ratio; if it’s too high, you’re likely not going to get approved. 

Too many Credit Cards…?

credit card

Now you’re looking at your stacks of credit cards and wondering if you’re in trouble, if they’re all maxed out then yes you are in trouble.  The real question here is having too many a bad thing? The answer is Yes and No because everybody’s situation is different. If you have a ton of credit cards but never use them, that can be a bad thing too because in the eyes of those lenders, that’s potential liability and it can affect your eligibility to get approved.

 Another big factor in determining your eligibility is how responsible are you with those credit cards? Opening up a bunch of credit cards just so you can have a higher limit can backfire and lower your credit score. Try to keep a small balance that you know you can pay off every single month and keep it consistent, not only will it improve your credit score but also shows that you are financially responsible. According to myFico.com, about 35% of your total score is based on your payment history, the key is keep a low balance and pay it all off. More is not always better, lenders do look beyond your credit score when deciding whether or not you’re eligible or not.

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Comments

  1. AngryByte says

    August 27, 2012 at 5:54 am

    Thanks

    Reply
  2. Modest Money says

    August 27, 2012 at 9:51 pm

    That’s true that it is more complex than just a certain number of credit cards being a problem. It really comes down to your activity on those cards. I have several credit cards, but I am very responsible with all of them. When you do have multiple credit cards, there is a greater chance that one might get compromised forcing you to waste your time verifying transactions and replacing the card.

    Reply
    • Aaron Hung says

      August 28, 2012 at 8:00 pm

      I have quite a few cards now too which I don’t think is a good idea but I can control myself:)

      Reply
  3. Veronica @ Pelican on Money says

    August 28, 2012 at 4:06 pm

    I had a credit card sitting around never used, and I think it hurt my credit score when I compared the last 2 times. This is purely speculative, anyone know if this could be true?

    Reply
    • Aaron Hung says

      August 28, 2012 at 7:58 pm

      I’ve also heard about that, did your score go down a lot? if it’s by a few points then I wouldn’t worry about it. Safest bet is to use it for your automatic payments like Netflix or something.

      Reply
      • Ornella @ Moneylicious says

        August 29, 2012 at 1:38 pm

        it’s not a negative impact. Like Aaron said, I wouldn’t worry about it.

        Reply
  4. Ornella @ Moneylicious says

    August 29, 2012 at 1:29 pm

    Personally, I think two credit cards is enough (one could be an AMEX. Don’t forget to have a mixture of credit–10% of your FICO

    Reply
  5. Paul says

    August 30, 2012 at 3:09 pm

    Yeah,

    Being responsible with credit is absolutely critical. What would you suggest people do when they lose a job, though?

    Reply
  6. Jen @ Master the Art of Saving says

    September 2, 2012 at 1:04 am

    I always try to keep our credit usage under 10% of what we have available, pay it off monthly and send the payments early to avoid any dings. 🙂

    Reply
  7. Ted Jenkin @ Your Smart Money Moves says

    October 23, 2012 at 5:36 pm

    Great article – Yes everyone’s situation is different I agree… Try to avoid purchasing things you DO NOT have the cash readily available to pay off (ie using the card for points, mile etc)… Those that end up being wealthy don’t make it a habit to revolve debt on their credit cards. If you have a goal this year to get rid of your credit card debt, here are 10 ideas to help you get rid of the plastic hangover. – 10 Ways To Reduce Your Credit Card Debt

    Reply

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