Too Many Credit Cards can Cause Bad Credit
One of the fallacies that many consumers have is that the more credit cards they have, the better their credit score will be. This myth is not true and for many people that strive to have many credit cards, it can cost them hundreds of dollars a year in extra interest costs due to a lower credit score. If you are looking to improve your credit score or to keep your credit score high, here are some tips on how too many credit cards can cause bad credit.
In our society, credit card companies and banks bombard consumers every year with attractive credit card offers. Many consumers receive a dozen or more offers for credit cards each and every month; however you should note that the more credit cards you have the more harm it can do to your credit score.
The reason why too many credit cards can cause bad credit is that with each additional credit card account you open, comes the opportunity that you can draw upon this card at any time. Even if you have a zero balance, the credit card companies will usually reason that at any moment you can access those accounts all at once. Since many credit cards give their users thousands of dollars in available funds. A person that has as little as 3 or four credit cards could have $40K or $50K at their disposal at any time. If income is equal to the amount of their available balance, or less, this can spook credit card companies, as well as lower your credit score. Just as income to debt ratio can lower your credit score, so can income to available balance.
While it is common to have a few credit cards, make sure that you are not over doing it. You don’t need to open up a credit account at every store you shop in. It is important to be choosey. If you have several credit cards that you don’t use, close these accounts. For most consumers, two or three credit cards at most will keep them safe in the case of an emergency and keep their credit scores up as well. While there is no exact number of credit cards that will automatically penalize you, look at your credit report and your financial resources to determine what the right amount of credit cards fits your lifestyle the best.
