A man in Santa Clara, California holds the Guinness World Record for the most credit cards: Mr. Plastic Fantastic, as he’s called, has almost 1,500 cards and a $1.7 million credit line. Though this certainly isn’t a normal case, Mr. Plastic Fantastic’s choices raise a good question: how many credit cards is the right number to have?
No one should carry 1,500 open credit card accounts, but one sole credit card is also not necessarily the right answer. In fact, the answer is far from one-size-fits-all. The right number of credit cards depends on many different financial factors. For some, opening more credit cards can boost your credit score. Opening too few, on the other hand, could hurt your record.
So how do you know if you’re carrying the perfect amount of credit cards?
Understand How Your Credit Score Is Weighted
Before you can know the ideal number of credit cards, you have to know which factors come into play. Here’s how a credit score breaks down:
Payment History: 35 Percent
Every payment you make on your credit cards makes a significant difference on your score. A single late payment stays on your credit report for seven years, so it’s crucial to pay on time. If you have a less-than-stellar record, don’t apply for more cards until you’ve cleaned it up.
Total Debt Owed: 30 Percent
Debt utilization ratio is also factored into your score. That’s how much you’ve charged in light of how much available credit you have. Your balance shouldn’t exceed 30 percent of your spending limit, but most lenders prefer 10 percent. For example, if a card has a $2,000 limit, keep your balance within the $200 to $600 range. The lower it is, the better it reflects on your score.
Length of Credit History: 15 Percent
Lenders get nervous about extending credit to people who don’t have much of a payment history. The longer your accounts stay open and in good standing, the better you look and the stronger your score will be. Leave old accounts open, use them occasionally and pay the balances quickly.
Credit Mix: 10 Percent
Having diverse accounts, such as a mortgage, a car loan, credit cards and retail accounts, works in your favor.
New Credit: 10 Percent
New credit doesn’t have much bearing. Your score probably won’t be affected when you get a new card if your current accounts are in good shape – and, as mentioned previously, the best way to build credit is to keep accounts open for years.
What Are Your Financial Habits?
Another important factor experts use to determine the ideal number of credit cards for a given person is fiscal responsibility. Many people use credit cards irresponsibly, and that can have a serious impact on credit scores.
Opening multiple credit cards can lead to the temptation to spend. Charging expenses you can’t afford can quickly result in a mountain of debt you can’t repay. In these cases, having multiple credit cards doesn’t justify the means of a credit boost.
If you pay on time every month and keep your balances low or at zero, taking on a few additional cards could help you. Just make sure you can handle the responsibility. Credit experts at TheBalance.com and NerdWallet recommend only following the ideal number of credit cards if you can be fiscally responsible.
The Magic Number of Credit Cards
Even financial experts aren’t in 100 percent agreement about the ideal number of cards to keep – however, there is one number that’s perfect for those in good credit standing.
That number is three. Three credit cards is the recommended “ideal” for those looking to maintain or improve their already consistent credit.
So, though Mr. Plastic Fantastic’s ideal credit card number is 1,497, yours certainly isn’t. For the average American, the perfect number of cards to carry is closer to three. Keep your accounts simple and your wallet slim by only choosing credit cards suited for your finances.