Should Consumers Avoid Having Too Many Credit Cards?

NEW YORK (Credit.com) -- Many consumers may have heard about a new trend in recent months that has led borrowers with stronger credit scores to accept the large number of offers for new credit cards they may be receiving from lenders.

The reason for this, ostensibly, is to reap the hundreds of dollars worth of points, cash back and miles now being offered on introductory deals for rewards credit cards, according to a report from Reuters. Some of these deal-seeking consumers can have as many as 40 or more credit cards in their name, and can earn anywhere between $2,000 and $3,000 per year just in the bonuses for signing up.

But some have cautioned that this practice of having a large number of credit cards can have a negative effect on a borrower’s credit score, the report said. However, experts note this isn’t strictly true as long as all the accounts are managed properly.

“You can’t have ‘too much credit,’ but you can utilize too much credit,” says Anthony Sprauve, a spokesman for FICO, told the news agency. “Credit utilization (amounts owed as a percentage of available credit) counts for 30 percent of a person’s credit score. The more of someone’s available credit they are using the bigger negative impact on their credit score.”

Proper account management is more important than anything else, the report said. Lenders even note that while those who have large amounts of credit cards might raise a few eyebrows when applying for larger loans like mortgages and auto financing, they won’t have a problem as long as everything is as it should be. Generally, experts recommend using 30 percent or less of credit available across all accounts to get the maximum benefit from this aspect of a credit score.

The key thing for consumers with numerous credit cards is to make sure they’re both using all their various cards enough to keep them active—usually just a few times a year will do the trick—and paid in full. Any unexpected account closings due to what lenders see is inactivity might affect credit utilization, and any payment that falls through the cracks—which can be easy when there are so many to keep track of—can take a huge chunk out of their credit score.

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