Sep 14
Tip for credit card lovers
Do you have a lot of credit cards? If so, you may want to re-consider. Why? Banks make lending decisions based on a number of factors including a person’s credit score. And the number of credit card accounts you maintain can affect your credit score.
The more credit cards in one’s possession the greater the amount of debt he or she can take on and possibly not repay. So if you might be looking for bank loans in the future you should consider minimizing the number of credit card accounts you have.According to Howard Strong, author of the book "What Every Credit Card User Needs to Know: How to Protect Yourself and Your Money": "You don't really want to have a lot of accounts you don't use because the credit-scoring system looks at your open lines of credit and the higher your open lines of credit, the less likely you are to have a good score."
Comments
With respect, I offer this additional piece of information because your original post gives the impression that canceling unused credit cards will be beneficial in terms of credit scoring.
You're right in saying that too many accounts can also hurt a score. But how many is too many? 6? 8? 50? …Fair, Isaac gives no clues as they only state “The score also looks at the total number of accounts you have. For different credit profiles, how many is too many will vary.
Having more than 3-4 credit cards is excessive. I personally only carry two; one for SHORT-TERM charges, and one for LONG-TERM charges.
Ideally, your credit card for short-term charges should be a card providing some type of benefits or rewards. Although this type of card may have higher interest rates than a standard credit card, it can be used to earn a variety of benefits such as free travel, cash back, shopping rebates, free gasoline and more. As long as you pay off your balance before the GRACE PERIOD ends, or as quickly as possible, your benefits should outweigh the higher interest you pay.
Your credit card for long-term charges should be the card you can find with the lowest ongoing interest rate. This way, you pay the least amount of interest on the balances you carry for the longer period of time.
ASAP Credit Card