How Should I Choose The Number Of Credit Cards I Need
While everyones mileage will vary on the number of credit cards carried, there are some numerical slots to use as a blueprint when deciding on the ideal number of credit cards.
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Should You Carry Credit Card For Emergencies
It would be best if you didn’t have to use a credit card for an emergencyand you’d have enough money in a liquid account like a savings account to use in such a situation. Being on vacation and not having money to cover a car repair or covering some other type of unexpected expense while away from home can be an example of where a credit card can come to the rescue. Other situations like an unexpected medical bill or losing your job can often drain any emergency savings and having at least two or three credit cards can be a useful thing in times of crisis. Ideally, these cards should have no annual fee, a relatively high credit limit, and a low-interest rate.
Keeping Your Credit Cards For A Long Time
The longer you’ve had your credit cards open, the better it is for your credit score, especially if you have a positive payment history with those credit cards. Keep your oldest credit cards around and use them periodically to help out your credit score, but also make sure you check out the latest credit card deals from time to time. If you have a good credit score, there’s a chance you can qualify for a credit card with better terms and rewards than the one you’ve had since you were a young adult.
The key to making sure your credit cards don’t hurt your credit score is to keep them open and active, in good standing, and with low balances.
Check Your Credit Report Annually Or Before Any Major Application
Your credit reference reports, held at Equifax, Experian and TransUnion, contain enormous amounts of data on you. Errors happen and can kill applications, so it’s important to check them regularly and to go through line by line to check nothing’s wrong.
If possible, check your report at all three agencies as different lenders use different agencies and don’t assume the info will be identical on each.
Following the introduction of the General Data Protection Regulation in May 2018, it’s now always free to check your credit report. See our full;Check Credit Files For Free;guide, which also includes info on what to check.
Things That Might Hurt Your Credit Score
Drops to your credit score can drastically affect your chances of being approved for a credit card, apartment rental or loan. If you have a low credit score, you may also end up paying higher interest rates on loans and credit cards than borrowers with high credit scores. This is because credit card companies and lenders want to ensure that they are lending money to people who have a history of repaying their debts and managing their finances well. If your score is on the low side, then lenders could compensate for that risk by charging higher interest rates.
Understanding what credit scores are made up of could help you manage your debt better and enjoy the greater financial benefits of having a good score.
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How Many Credit Cards Is Too Many
Even having two credit cards can be one too many if you can’t afford to pay your bills, you don’t need it or don’t plan to use it for some purpose. While getting a new credit card can sometimes improve your credit score by potentially lowering your total credit line utilization, getting a lot of cards in a short period of time is not advised. Many card issuers even have rules in place to combat this phenomenon that has arisen with customers who try to game the system by signing up for lots of credit cards to earn the bonuses and then cancel after meeting the spending requirements. For example, Chase has a policy termed 5/24, which doesn’t allow you to be approved if you have applied for more than 5 credit cards in the past 24 months. Another potential downside of having a large number of cards is that it can make you look risky to lenders and lower your credit score. Even if you have them all paid off the mere fact that you have a lot of open and available credit lines can make you look like a potential liability to the next lender. So, while there is no absolute number that is considered too many, it’s best to only apply for and carry only those cards that you need and can justify using based on your credit scores, ability to pay balances and rewards aspirations.
How To Request A Higher Credit Limit
There are a few ways to get a higher credit limit.
Sometimes it doesnt require any action from you. Some credit card issuers regularly consider cardholders for an automatic credit limit increase. Alternatively, you can ask for a higher credit line by contacting your bank. You can do so by submitting your request online on your banks website or by calling the number on the back of your credit card.
After six to 12 months of perfect payment history, call any credit card company that you hold a balance with, Nicole Schmied, founder of SmartCookie Hacks, suggests. Ask for them to increase your limit. They dont need to know if you have zero intentions of using it but if you deserve the increase, youll get several points for having a lower utilization rate.
If youre denied, dont worry and try again in six months or later. Ask your issuer how you can improve your chances and follow that advice to work on your credit.
Prepare for this conversation by deciding what youre going to ask for. You might have your credit line doubled, but its not recommended to request such a significant increase as it may signal financial trouble to your creditor. Instead, you can typically count on a 10-20% increase, and theres no harm in asking for a number on the higher end of this range.
If youre denied, dont worry and try again in six months or later. Ask your issuer how you can improve your chances for the next time and follow that advice to work on your credit.
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How Many New Accounts You Have
Your FICO Scores look at how many new accounts you have by type of account. They may also look at how many of your accounts are new accounts.
Don’t open new accounts too rapidly.
If you’ve been managing credit for a short time, don’t open a lot of new accounts too rapidly. New accounts will lower your average account age, which will have a larger effect on your FICO Scores if you don’t have a lot of other credit information. Even if you have used credit for a long time, opening a new account can still lower your FICO Scores.
Why Should I Care
Here are some of the things a poor credit score can impact:
- Renting a house/flat: The landlord may run a credit check on you to make sure you can afford to pay the rent. If you have a low credit score, they may assume youre a high-risk individual and will be put off renting a property to you.
- Getting a job: Employers may run a credit check before employing you to ensure that you are fit to take on the role.
- Rejection of loans: A poor credit rating might make it harder to get mortgages, personal loans, car loans, credit cards and even some federal student loans.
- Mobile phone contracts: Many providers run credit checks before taking on a new phone customer to ensure that youll be able to pay on time.
- Your insurance premiums: A poor credit rating might mean that insurance customers will charge you a higher premium as you will be perceived as higher risk.
When you apply for any of these, the potential lender will usually check your credit score, and if you have a low credit score, you most likely wont be offered the loan.;
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Where Do I Get My Free Credit Report
You can get your free credit report from Annual Credit Report. That is the only free place to get your report. You can get it online: AnnualCreditReport.com, or by phone:; 1-877-322-8228.
You get one free report from each credit reporting company every year. That means you get three reports each year.
Is A New Credit Card Right For You
Theres no denying the benefits of credit cards. When you use a credit card responsibly, it can help you build credit and earn valuable rewards;in the process. A credit card is also one of the safest ways to pay for transactions thanks to the robust fraud protections available through the Fair Credit Billing Act.
But there are some instances where a new credit card might not be a good fit for youat least not for now. As mentioned, if you plan to apply for major financing in the next three to six months, you may want to put off all non-essential credit applications in the interim.
A new credit card might also be a bad idea if you dont trust yourself to avoid racking up additional debt. When you revolve a balance from month to month on your credit cards, its expensive. This bad financial habit could also trigger an increase in your credit utilization rate. Higher credit utilization might lower your credit score even if you keep your monthly payments on time.
Are you worried the additional credit limit of a new credit card will be too tempting? If so, its better to focus on budgeting and paying off debt first, before opening a new account.
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Tips On Managing Multiple Credit Cards
Remember, having multiple credit cards doesnt necessarily harm your credit score. In fact, your credit report benefits from using established credit cards at least every few months. Just keep a couple simple things in mind to make sure youre getting the maximum benefit out of your cards:
- Paying on time is the most important thing. When you track multiple cards, online banking can be a helpful tool for managing multiple accounts. Setting automatic payment reminders can help you keep your due dates straight. If youre a Bank of America card client, learn more about setting up Mobile and Online Banking alerts.
- Dont use all of your available credit. Try to use no more than 30 percent.
- If youre new to credit cards, make sure you can manage your first card. Wait for a set period, like 12 monthly billing cycles, before adding another one.
Where To Access Your Free Credit Reports
Thanks to the Fair Credit Reporting Act, you can access a free credit report from Experian, TransUnion and Equifax once every 12 months . Your free reports are available at AnnualCreditReport.com.
You may be entitled to additional free reports under any of the following circumstances as well.
- Youre unemployed and plan to apply for a job within 60 days
- A company denies your application or offers you worse terms based on your credit when you apply for credit, insurance or employment.
- You receive public assistance income
- Youre a victim of identity theft or fraud
Setting Up Utility Accounts
Utility companies, including gas, water and power providers, may check your credit before opening a new account for you. If you have poor credit, you may have to pay a security deposit to open an account and get your utilities switched on. Having good or excellent credit can make the entire process easier and cheaper.
Before You Apply For A New Credit Card
Although it can be tempting to jump on an attractive credit card offer, you should take a moment to consider a few factors before you fill out the application. Think about what you want to do with your credit over the next three to six months. If you have any major purchases planned, its smart to put unnecessary credit applications on hold.
Do you have plans to apply for a new mortgage? Are you going to finance a new vehicle? In either case, its best to keep your credit history as stable as possible until the keys are in your hand.
In addition to deciding if its the right time to apply, you should also assess the current condition of your three credit reports and scores. Credit card issuers will check your credit when you apply for a new account. You want to make sure your credit is in the best shape possible;before you fill out an application.
Its also wise to check your credit reports in advance and make sure no unpleasant surprises are waiting for you. If you discover any credit reporting errors or suspicious information, you have the right to dispute those mistakes with the credit bureaus.
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Do I Need To Get My Credit Score
It is very important to know what is in your credit report. But a credit score is a number that matches your credit history. If you know your history is good, your score will be good. You can get your credit report for free.
It costs money to find out your credit score. Sometimes a company might say the score is free. But if you look closely, you might find that you signed up for a service that checks your credit for you. Those services charge you every month.
Before you pay any money, ask yourself if you need to see your credit score. It might be interesting. But is it worth paying money for?;
Consider Getting A Credit
If you have a poor credit history, you might want to think about getting a credit-builder credit card. These are cards designed for people who either have made little previous use of credit or who have a bad credit history. But credit limits on these cards are often low and the interest rates are high. This reflects the level of reassurance your credit file information provides to lenders.
Butbe aware that the interest rates charged are much higher than standard credit cards. Typically, youll be paying over 30% in interest a year, which is another reason to try to pay off any balance in full each month. Otherwise, you might end up in debt that you struggle to get out of, which could harm your credit rating even further.
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How Many Credit Cards Does The Average Person Have
The average American has 3.84 credit card accounts. Thatâs according to the 2020 data from ExperianÂ®, one of the three major credit bureaus. But numbers might vary depending on the source. And while what others are doing might be helpful to know, it shouldnât necessarily tell you how many credit cards you should have.
Remember that not everyone has a credit card. And using credit responsibly is important no matter how many credit cards you have.;
Become An Authorized User
If you have a mystifyingly benevolent parent with impeccable credit, ask to be added to his/her account as an authorized user. This will not only help your credit utilization but it should also lengthen your credit history. Remember, this card is strictly for a credit boost, so do not under any circumstances, use the card when it arrives in the mail.
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Dont Ask For More Credit Too Soon
Asking for a limit rise within 6 months of receiving a new credit card can indicate financialdifficulties, and lenders may be less willing to give you more credit. Waiting for your lender or bankto automatically increase your credit limit could be the best option, as it avoids making a request thatmight negatively impact your credit score.
Some Defaults Or Missed Payments & Declined Applications
Defaults or missed payments will usually stay on your report for six years. If you close an account, the missed payments could stay on the account for six years after the closure, so keep that in mind. Bankruptcy is wiped six years from the date you’re declared bankrupt, provided it’s been discharged.
And when it comes to declined applications, lenders can only see whether you’ve applied for credit elsewhere, not whether you’ve been accepted or declined. However, they may be able to guess by examining the credit accounts you have open and when they were opened.;
If you’ve attempted to, or have successfully reclaimed PPI or bank charges, it won’t appear on your credit files. If you’ve had bank charges, the penalties will show on your records.
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How Do Store Cards Work
Store cards, or retail cards, are a type of credit card you can only use with one store or a family of stores. Usually you can use them both in-store and online to buy merchandise just as you would with a traditional credit card, while enjoying discounts or perks you may not otherwise access.
The Kohls Credit Card is a good example. Its a charge card, so you can only use it on purchases in Kohls stores or at Kohls.com, and its biggest benefits are frequent special sales and promotions for cardholders, like discounts that range from 15% to 30% off.
The Kohls Credit Card doesnt charge an annual fee, but its variable APR is high, at 25.99%. Thats common among store cards, though their features can and do vary depending on the retailer that offers them.;