There is no magic number of credit cards to pursue, but some guidelines can help you navigate your way to solid financial ground. The number of cards you have — and their combined credit limits — can affect your credit score, which then impacts your ability to secure important things like car loans and apartment rentals.
Is There A Magic Number?
Credit scoring formulas do not punish you for having too many credit accounts, but you can have too few. Finance experts suggest that five or more accounts — which can be a mix of cards and loans — is a reasonable number to build toward over time.
Having very few accounts can make it hard for scoring models to render a score for you. Four or fewer accounts are generally considered to be a “thin file.” It’s harder to score high with a thin file than with a fatter one, and lenders also might view thin files as riskier.
And with a thin file, your credit actions can have a bigger effect on your score than if you had more accounts. A good example: With few cards, it might not take much spending to use a lot of your overall credit limit. How much of your credit you have in use is called credit utilization, and people with the best scores tend to use less than 10% of their limits. More cards may help you with keeping credit utilization low.
On the other hand, if having lots of cards makes your life complicated and you miss a payment, that can devastate your score. Make sure you’re able to stay on top of due dates.
So… How Many?
Your spending habits and ability to pay all bills on time determine the sweet spot for you as an individual.
Americans on average have three credit cards and 2.3 retail (store) cards, according to a 2021 report by Experian. Most people build their credit portfolio over time as they age and their credit needs expand.
However, it’s important to note: You must be at least 18 years old to apply for a credit card, and it might be difficult to get approved if you’re under 21.
As you start with credit, It’s a good idea to focus on building good financial habits. Having a reliable income is only one piece of the puzzle. Things like good organizational skills, a solid understanding of how to manage money, and an ability to meet deadlines are crucial.
What Is The Best Credit Card?
If you are thinking about opening a credit card, it’s smart to think about how and where you spend your money. Many credit cards offer specialized rewards or other benefits that can be added perks to your regular spending. If you like racking up rewards points, you might want to explore the best cards to maximize grocery, travel, or gas spending or ones that offer cash back.
If you want to keep things simple, that is fine too. Focus on the credit habits you follow, regardless of the number of cards you carry. Paying on time and not using too many of your credit limits have a powerful effect on credit scores.