Does Having Multiple Credit Cards Hurt Your Credit Score?

Will your FICO® Score go down if you open too many credit cards? And how many cards is "too many," anyway?

The short answer is that it doesn't matter how many credit cards you have -- as long as you use them right. You can achieve an excellent credit score with one credit card or 20.

The long answer is a little more complicated, though. I'll break it down in plain English.

What goes into your FICO® Score

Here are the factors in your FICO® Score and how they're weighted:

• Payment history (35%): Your track record of paying bills on time. A single late payment can really hurt your score.
• Credit utilization (30%): Your total balances divided by your total credit limits. Under 30% is good, but the lower, the better.
• Length of credit history (15%): How old your credit accounts are. Keeping at least one card open for a long time helps a lot.
• Credit mix (10%): The variety of loans and credit lines you have. A mix of loan types is good for your score if you're staying on top of your payments.
• New credit (10%): How often you apply for new cards or loans. One application will ding your score in the near term; several applications every year will hurt more.

Note that "number of credit cards" is not on the list. You want to have at least one credit card to build your FICO® Score, but there's no upper limit.

In fact, having several credit cards can raise your score. Here's how.

How multiple credit cards can help your credit score

The more credit cards you have, the higher your total credit limit. A higher limit can improve your credit utilization, the second-biggest factor in your FICO® Score.

Let's say you have one credit card with a $10,000 limit and a $3,000 balance. Your credit utilization is 30% ($3,000/$10,000).

But if you have a $3,000 balance across three different cards with a combined limit of $30,000, then your credit utilization is 10% -- much better.

If you pay your bills in full every month, then you may think your credit utilization is 0% no matter what. But that's not necessarily true. Different card issuers report your balance to the credit bureaus at different times -- and odds are it won't be right after your payment due date.

So having more than one credit card can improve your credit utilization even if you pay off your balance each month.

How multiple credit cards can hurt your credit score

The more credit cards you have, the easier it is to rack up debt and miss payments. If you might be tempted to spend money that you can't repay right away, then more credit cards is not the answer. Remember: Payment history matters more than any other factor in your score.

Also, opening multiple cards every year will count against you in the "new credit" and "length of credit history" categories. The impact will fade away over time, but you should still avoid frequent application sprees.

How many credit cards should you have?

There's no "one size fits all" answer. What matters most is:

1. How many credit cards you can manage and pay off every month
2. How many cards you want to use in order to maximize your rewards

For most people, I think two or three cards is plenty:

• A cash back card for everyday spending
• A rewards card that earns more cash back or points in your biggest spending category
• Perhaps a travel card that turns spending into free trips

With this setup, you can earn 2% to 5%-plus on every purchase without juggling a lot of cards.

But if you can manage several credit cards, then it's possible to earn at least 5% back on most of your spending -- without hurting your credit score. I know people with 800+ credit scores who have over a dozen cards.

Just make sure every card in your wallet serves a purpose.