How Many Credit Cards You Should Have

When it comes to the number of credit cards a person should have, there's no single magic number. The average American owns about 3.9 active credit cards.1 But is that too many? Too few? Ultimately, it depends on your personal financial situation. Find out what to consider when deciding how many credit cards you should have in your wallet.

How Credit Cards Affect Your Credit Score

Before you worry about choosing the right credit card, it's important to understand how credit cards impact your credit score. Having good credit isn't just important for borrowing money; you need good credit to rent an apartment, open utility accounts and in some cases, get a job. Let's look at how your FICO credit score (the most commonly used scoring model) is calculated:2

• Payment history: 35%
• Amounts owed: 30%
• Length of credit history: 15%
• New credit: 10%
• Credit mix: 10%

Each one of those credit score factors can be impacted by the credit cards you have, either positively or negatively.

Payment history

Payment history is the most heavily weighted factor in calculating your credit score. This means paying your bills on time — including monthly credit card bills — is the best thing you can do for your score. However, missing even one payment can knock your score down considerably.

Amount owed

Amounts owed refers to the total amount of debt you owe in relation to the total amount of credit extended to you. This is known as your "creditutilization ratio."3 For example, if you have a $5,000 credit limit and you charge a $1,000 balance, your credit utilization ratio would be 20%. Revolving debt, such as credit cards, tends to be weighted more heavily when factoring amounts owed into your overall score. It's recommended you keep this number below 30% to maintain a good credit score, though even less is ideal. Even if you pay your entire balance off every month, you could get dinged for running up a large balance before your bill is due. That's because credit card companies often report balances to the credit bureaus on a separate date than your payment due date. You can call your card issuer to find out when they report your balance — and be sure to pay it down ahead of time to keep your credit utilization ratio low.

Age of credit history

Another variable that impacts your credit score is the total number of years you've had credit-based accounts — plus the average age of all your accounts. The longer your credit history, the more confident lenders are in your ability to manage debt responsibly. However, opening new credit cards can lower the average age of your credit, which will decrease your credit score. For example, if you owned one credit card for 10 years and then got a new one today, the average age of your accounts would drop to five years. That's not a big deal if you open a new card every once in a while, but getting several new cards within a short period of time can make your credit history appear shorter. So it's best to apply for new credit sparingly.

New credit

Applying for too many cards over a short period of time can also be a red flag that you're overly dependent on borrowing to get by. That can ding your score.

Credit mix 

Lenders like to see that you have experience managing a variety of debt, from revolving lines of credit to various types of loans. So if the bulk of your experience managing credit is with credit cards, your score may slightly benefit from diversifying your credit mix by taking on a mortgage, auto loan, or personal loan. But don't worry too much: Since this category only makes up 10% of your score, there's no need to go out of your way to take on other types of debt. It's always best to borrow only what you need. That said, a personal loan can be a great way to consolidate higher-interest credit card debt into a one, lower-interest monthly payment.