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Credit Card Basics

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,

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

There is no specific number of credit cards considered right for all consumers. Everyone's credit history is different. Lenders tolerate different levels of risk, and different credit scoring formulas 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 that card's contribution to your available credit limit. Loss of available credit could increase your credit utilization ratio, which is a major factor in your credit scores.

Your utilization ratio is your total credit card balance relative to your total credit limit on all your open credit card accounts. The closer this percentage is to zero, the better its impact on your credit scores. When you close an account, your utilization ratio could increase, hurting your credit scores.

There are a lot of "ifs" you should consider before you close an account. Here are a few:

  • If you plan to apply for new credit in the next three to six months, you should leave the credit card 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 likely dip. Consider your overall financial situation, not just your credit scores, 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 have open could be hurting your scores, think about ordering a copy of your credit score before making any changes.

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

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.

What Affects Credit Scores the Most?

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

Thanks for asking,
Jennifer White, Consumer Education Specialist