How many credit cards should I have?

Having a good credit score is important for getting approved for loans, getting a good interest rate on those loans, and even for things like securing an apartment lease. But there’s a lot of confusion around how to get a good score — and how the number of credit cards you have might affect your score. So, this might leave you wondering, “How many credit cards should I have?”

This guide will set the record straight. We’ll go over how credit scores are calculated, how opening new credit cards might affect your score, and how the total number of cards you have may influence your credit.

How many credit cards should I have?

If your goal is to build good credit, having at least 1-2 credit cards is a good idea — as long as you use those credit cards responsibly. Having more than that won’t necessarily hurt your score, but it depends on how you use credit.

Lenders like to see that you can use credit responsibly. To gauge that, they look at how you’ve used credit in the past — including your use of credit cards.

If lenders see that you have open credit cards and have made payments on time, they are more likely to want to approve you for another loan or credit card. If they see a limited credit history, they may hesitate more to approve you.

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If you’re curious, the average American has around 4 credit cards.

How are credit scores calculated?

To understand how credit card accounts can affect your credit, let’s first look at the basics of credit score calculations. The most common credit scoring system is FICO, so we’ll use the FICO credit score factors to explain.

FICO Scores are calculated using data from your credit report, which shows how you’ve used credit in the past. Specifically, the formula looks at the following factors:

• Payment history (35% of your score): This factor looks at your record of payments. If you always pay by the due date, that will improve this factor (even if you only make the minimum payment). If you miss payments or make late monthly payments, this can lower your score.

• Amounts owed (30% of your score): This factor considers the total amount you owe on all your credit accounts and compares this to the amount of available credit you have. It calculates your “credit utilization,” which is the percentage of available credit you’re using. For example, if you have $10,000 in total credit lines and current balances totaling $2,000, your credit utilization ratio is 20%. It’s typically recommended to keep credit utilization under 30%.

• Length of credit history (15% of your score): This factor looks at how long you’ve been using credit. It considers your oldest open account as well as the average age of your open accounts. The longer your credit history, the better.

• New credit (10% of your score): This factor looks at any recently opened credit accounts you have. Opening too many new accounts (or submitting multiple credit card applications) in a short period of time can ding your score.

• Credit mix (10% of your score): This factor considers the different types of credit that you’re using. Credit types include credit cards, student loans, mortgages, car loans, and more.

How can multiple credit cards affect your credit score?

There are a few different ways that having several credit cards can affect your score. Some effects are positive, while some are negative.

Note: Payment history is the number-one most important factor in your score. This factor is unaffected by the number of credit cards you have — but it’s very important to pay on time, whether you have one credit card or many.

Potential negative effects to your credit

• Shortened average age of accounts: When you open a new credit card, that will lower your average age of accounts (which affects the “length of credit history” credit rating factor). This could potentially lower your score.

• Hard inquiries and new credit: When you apply for a card with a credit card company, the lender will access your credit report in what’s known as a “hard credit inquiry.” This inquiry — as well as the newly opened card — can affect your “new credit” factor and might temporarily lower your score.

Potential positive effects to your credit

• Lowered credit utilization: Credit utilization is a measure of your current credit card debt compared to your total available credit. When you open a new credit card, you’ll then have more available credit (because the new card will come with a credit limit, expanding your access to credit). If you don’t take on any more debt on the new card, this can lower your credit utilization rate and potentially boost your score.

• Improved credit mix: Credit mix looks at the number of accounts, and the different credit account types you have open. Ideally, you want to have a mix of credit cards and loans. If you have a relatively thin credit profile with few open accounts, opening a credit card may help improve your score.

Should I open multiple credit cards?

This all depends on your financial goals, your credit score, and your financial situation. Here are some things to consider.

If you have excellent credit already, having multiple credit cards might help you earn cash back with a general cash back card. 

Parents: The Greenlight Family Cash Card gives you up to 3% unlimited cash back on every dollar you spend. No purchase categories to keep track of. No limits on how much cash back you can earn. And no need to fumble with multiple credit cards — ever again.

If you have poor credit or a limited credit history and you’re having trouble getting approved for credit, you may wish to start with a secured credit card first.

If you have average credit, you should pause to consider the credit scoring factors discussed above. Is your score due to your spending habits, late payments, or past bankruptcy? If so, opening more credit cards likely won’t help (and in fact, using a debit card might be a better fit in this case). But if your average score is due to too few accounts/low credit mix or excessive credit utilization, then opening a new account may actually help.

To reach your personal finance and credit goals, it may be worthwhile to sign up for a credit monitoring service, like Credit Karma or Credit Sesame. These tools help you monitor your credit score and determine which next steps might help you boost your score. You can also typically check your estimated credit score through your credit card issuer’s online portal.

Finally, remember to consider the general pros and cons of opening another credit card, outside of any potential credit effects. For instance, the card might have an annual fee, which you’ll have to budget for. Or it may have a great rewards program with perks like cash back or airline miles.

When it comes to credit, knowledge is power

Ultimately, the number of credit cards you have won’t have a huge effect on your score. Factors like making on-time payments and keeping debt levels in check are far more important.

Knowing where you stand credit-wise is a great first step to improving your financial situation and your credit rating. You can monitor your own credit using a credit tool or by checking your estimated credit score using your credit card. Most credit card issuers provide estimated credit scores via their member portal.

If you have kids, now is a great time to start introducing them to personal finance and credit topics. Greenlight’s financial literacy game for kids and teens — Level Up — is a fun way to start.

Greenlight tip: You may also want to consider building your child’s credit early on.

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