If you’ve ever heard that there’s a magic number of credit cards you should have in your name, you heard wrong. In fact, the number of credit cards you have is significantly less important than how you’re managing the cards that are open in your name. By acting responsibly with your existing credit cards, you’re more likely to have a positive impact on your credit score.

Your credit score is impacted by these main factors:

  • Use of credit cards: total available credit limit vs. how much of it you’ve used
  • Percentage of on-time payments: how often you pay your bills on time
  • Number of derogatory marks: indications from collection agencies and companies that you’ve poorly managed your credit, including bankruptcies, foreclosures and liens
  • Age of open credit lines: how long you’ve had your lines of credit open
  • Total number of credit accounts: the sum of your credit cards, loans, mortgages and other lines of credit
  • Hard credit inquiries: credit score requests needed to open new accounts made by auto lenders, banks,
  • Recent behavior: number of new accounts opened over credit history
  • Mix of accounts: types of credit accounts (car, mortgage, credit cards, etc.)

Notice that “number of credit cards” is not on the list. However, having multiple credit cards can work in your favor if your personal situation would so benefit:

  • Higher total credit limit: if you have multiple credit cards, chances are you’ll have a higher overall credit limit which will allow you to have more spending power and earn more rewards
  • Chance to show responsibility: if you pay multiple credit card bills responsibly month after month, your on-time payment percentage will increase which can have a positive impact on your credit score
  • Larger total number of accounts: historically, credit scores are impacted positively when you have more credit accounts, with the assumption made that you’ve been approved multiple times in the past (unless you open too many accounts in too short a period of time)

So how will you know if opening a new credit card is right for you? Here are some tips:

  • Look at what you already have: If you already have a Visa and a MasterCard, consider opening an American Express or Discover card. The more variety you have, the more likely you’ll be able to complete purchases pretty much anywhere in the United States.
  • Do your research: What kind of perks would benefit you the most? Open a credit card that is useful not just for buying power, but for what you’re looking to do with your life. Do you like to travel? Save money at restaurants? Do you drive a lot? Many credit cards offer rewards programs that can help you get more bang for your buck.
  • Don’t overdo it: If you feel you can’t manage multiple accounts or don’t have the willpower to control your spending habits, don’t open a new credit card. You can always call your existing credit card providers to ask for an increase on your spending limits instead.

Whatever you choose to do, know that you should always consider your own personal situation before taking advice from anyone else. The team at McCabe & Associates offers full-service financial planning, including budgeting and financial coaching, and can help you make financial decisions that can make you more confident in your financial future. If you’d like to discuss how we can help you, please feel free to contact us.