How Many Credit Cards Should I Use?

The amount you owe represents some 30 percent of your credit score points, which is the second largest contributor to your credit score. This category not only includes the total credit utilization (revolving and installment), but also the number of accounts with a balance. Credit card utilization represents the total balance of all your credit cards compared to your combined credit limits. To put it another way, it is how much you have used of your available credit. Credit card utilization has the largest impact in this category. So how many credit cards should you use in order to maximize your score?

Credit card utilization

For example, if the total amount you owe on all of your credit cards totals 5,000 and the combined credit limit on all your cards totals 20,000, you have used 25 percent of your credit limit.  Credit score experts vary in their opinion of what the ideal proportion should be, but the ideal target is below 10%.

The more credit cards you have; the more available credit you have.  You can get into the trap of using all the cards and continue charge more on them.  When it becomes time to pay, you pay only the minimum balance or less than the amount due, which only gets you closer to your credit limits.  Creditors view those who have used a lot of their credit as a high risk, because they may not be able to pay their debt.  High credit card utilization can result in a negative impact on your score.

Use one card

Some think that it is better to use only one card and not use another credit card. This strategy does not help increase your score.  The amount owed category of a credit score not only looks at the total utilization for all cards, but also the utilization per account. If you are close to your credit limit on one account, this can hurt your credit score.

If you want to use only one card, you would need to pay the balance prior to your account closing date each month to keep the utilization proportion low.  If you do so, you need to make sure the payment is received several days prior to the closing date, so that it gets credited in time.

You don’t want to max out one card, and or have balances on all your cards. The reason is you have too many accounts with a balance, and at least one near its credit limit.   Use a few of your cards and keep your balances low, so your utilization is below 10 percent.  It may not happen overnight, but you should strive to pay down your credit cards.