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How many credit cards is too many?

Dear Experian,

I think I have too many credit cards and would like to close a couple. I have good payment history with these credit cards; however, I heard my FICO score will go down if I close accounts? I also heard it’s bad for a FICO score if you have too many credit cards even if they have zero or low balances. Is that accurate?

– JDL

Dear JDL,

Could Having Too Many Credit Cards Impact Your Credit?

As with almost every question about credit reports and credit scores, the answer is that it depends on your unique credit history and the scoring system the lender is using. “Too many” credit cards for someone else might not be for you.

There is no specific number of credit cards that is considered the right number all consumers should have. Everyone’s credit history is different. Lenders have different levels of risk tolerance, and different credit scores have different criteria.

What one lender views as “too many” credit cards may not be the same as another. Therefore, how many credit cards are considered “too many” will vary depending on both your individual credit history, who is looking at your credit report, and the scoring system they are using.

Closing Accounts Could Hurt Credit Scores

It’s true that closing accounts may hurt your credit scores. The reason is that when you close a credit card you lose the available credit limit for that card. Loss of the available credit increases your utilization rate, or balance-to-limit ratio.

Your utilization rate is the total of the balances on all your credit card accounts divided by the total of limits on all your open credit card accounts. The lower this percentage, the better for your credit scores.
When you close an account, the utilization rate will increase, temporarily causing a decrease in your credit scores.

There are a lot of “ifs” that you should consider before closing an account, here are a few:

  • If you are planning to apply for new credit in the next three to six months, you should leave the accounts open until you complete the transaction.
  • If you have very good scores, closing an account will likely cause a dip in your scores, but probably not enough to prevent you from getting the credit you need or want, or to cause your rates to increase.
  • If you are having trouble paying your existing debts, you might want to close the accounts to remove the temptation to charge more, even though your scores will dip. Consider your overall financial situation, not just a credit score when making the decision. Do what is right for your long-term financial well-being.

Credit Score Risk Factors Can Help You Understand What is Affecting Your Report

If you are considering closing accounts because you feel like the number of credit cards you currently have open could be hurting your scores, consider ordering a copy of your credit score before making any changes.

When you receive your credit scores, you should receive a list of risk factors that will describe what elements in your credit report are affecting your score negatively.

If one of the factors listed is “too many open revolving accounts,” then you may want to consider closing one or two. However, if the number of open revolving accounts is not listed as a factor, then you probably don’t need to be concerned with the ones you already have.

The single most important factor in credit scores is always your payment history. The second most important factor is your credit utilization rate. As long as you continue to make all your payments on time and keep the balances on your credit card accounts low, your creditors will be able to see that you are managing your credit responsibly, and your credit scores will reflect that.

Thanks for asking,
The “Ask Experian” Team

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