credit card advice
If you’ve ever asked yourself, “how many credit cards should I have,” you know there’s no easy answer. The fact is different credit and financial situations dictate different solutions to how you address your credit needs.
If you use credit infrequently and don’t carry a high balance, a single card is probably right for you. However, if you travel a lot or rely on reimbursement of expenses, you may quickly run up the limit on a single card.
How about my credit score?
Some people wonder if the number of credit cards they carry has any impact on their credit score. This is a question that FICO, the creators of the largest credit rating system, have answered directly.
“You can get an excellent FICO score if you have only one credit card or even no credit cards. The key is how you use the credit that you are granted,” said Craig Watts, spokesman for FICO.
The way FICO determines your credit score relies to an extent on the number of cards you have – but only indirectly.
For example, if you have a single card with a limit of $3,000, carrying a balance of $2,000 would mean your debt-to-credit ratio would be 66 percent, which is not considered to be good by FICO.
But if you have a second card with a limit of $3,000 and no balance due, your ratio is only 33 percent, which is looked at much more favorably.
“The best practice is
to keep your balances low.”
Is there a limit to how many cards are considered OK?
According to the Consumer Credit Protection Agency, there is a direct correlation between a higher number of credit cards and the level of overall debt a person has.
This is probably due to an attempt at paying down debt by getting more credit – NEVER a good idea.
If you find you are applying for more credit just to pay off the bills you owe, then there is a serious problem – one that more credit cards will only exacerbate.
The best practices for using the credit card or cards you carry and to keep your debt manageable is to keep your balances low, pay all of your bills on time and only apply for new credit when you really need it to maintain a healthy debt ratio.
Photo source: huffpost.com.