How many lines of credit should I have? | Vital (2024)

You might have read having multiple credit cards and lines of credit is good for your credit score. But yet aren’t sure what’s the optimum number? In this article, we’ll highlight the benefit of having multiple lines of credit, how they affect your credit score, and explain how many you should have.

What is a line of credit?

A line of credit is a credit facility in which a financial institution – like a bank – provides a maximum loan amount that a borrower can borrow from until the line of credit is sanctioned.

It doesn’t matter if you’re an individual loanee, a business owner, or a government body; you have the freedom to borrow as much as you want, as long as you bear in mind the maximum credit limit. The interest is levied as soon as the money is borrowed.

How is a line of credit helpful?

You can’t take out a loan each time you need funds that your monthly salary can’t cover. A line of credit is typically used to overcome these shortages or to fund projects whose expenses cannot be predicted in advance.

There may be situations when a merchant is unwilling to accept credit cards, and you must make substantial cash payments. This might also happen when you celebrate special occasions, such as weddings or birthday celebrations.

How many lines of credit should I have?

There is no “one-size-fits-all” for the number of credit lines one should hold. You must assess the financial situation; look at your need for loans and your capacity to repay the loan within the given timeframe.

While two lines of credit might be excessive for some, others might see it as a good thing because it increases their credit scores.

The average American has 3.84 credit cards. According to FICO, individuals with three open accounts had excellent credit scores ranging from 750 to 850.

Average number of credit cards by state

  • New Jersey: 3.49
  • New York: 3.34
  • Rhode Island: 3.26
  • Hawaii: 3.25
  • California: 3.23

However, applying for many credit lines within a short period, might lower your credit score, making you appear risky and unstable to banks and other lenders.

How do multiple lines of credit affect my credit score?

In a few ways:

  • Managing due dates can be difficult: If you can't keep up with all your credit cards' payment due dates, late payments can negatively impact your credit score
  • You’ll gain access to higher credit amounts: Higher available credit can help your credit utilization ratio, as long as you use less than 10% — or, ideally, less than 10% — of your available credit
  • Your credit history’s average length will reduce: Shorter average credit history length can have an effect on your credit score

While having multiple lines of credit is generally viewed as a positive, here are some other points that you should be aware of:

Managing due dates can be difficult

Paying your bills on time is one of the most crucial aspects of your credit score. A history of on-time payments also allows you to avoid late fees and other charges like penalty interest rates. It may be more challenging to handle multiple payment dates if you have more than one line of credit.

However, there is a fix. Many credit card companies let you modify your payment due dates via their app or website, allowing you to select a convenient day for you to make payments. This way, you could do something like setting your payment date on the day you receive your monthly salary.

Apart from this, some vendors also offer autopay services for a minimum amount. This ensures that your payments are made on time.

You’ll gain access to higher credit amounts

You will obtain a new credit line for each new card you are issued, increasing your available credit. This can be a terrific strategy to boost your credit score, but only if you continue to spend an amount similar to what you were spending before you acquired the new card.

If you overspend on a new line of credit, you risk increasing your usage and harming your credit score. When it comes to acquiring numerous credit cards, the ideal method is to keep a consistent level of spending – around 10% or less of your total credit limit is a safe range.

Your credit history’s average length will reduce

Credit scores reflect the average amount of time you’ve had a line of credit rather than the age of your first account. As a result, each new credit card you obtain reduces the average duration of your credit history.

While hard inquiries drop your credit score by roughly five points, it usually recovers within a few months. However, if you open new cards regularly, the negative effect might pile up on your credit score.

The pros of having multiple lines of credit

There's a lot consumers stand to gain by using multiple credit cards:

  • You can keep your credit utilization ratio low
  • Multiple cards equal multiple rewards
  • You have fraud protection
  • You’ll have backup cards

Let’s discuss why having multiple lines of credit can be beneficial if you manage them correctly. Here are the pros of having multiple lines of credit:

You can keep your credit utilization ratio low

One of the main concerns about having several lines of credit is its impact on your credit score. However, many people don’t know that having more than one line of credit can boost your credit score by making it easier to maintain a low credit utilization ratio.

The credit utilization ratio is the percentage of the total amount of credit available to you that you are using. This ratio affects up to 30% of your credit score.

Multiple cards equal multiple rewards

Having multiple credit cards gives you access to multiple lines of credit and multiple incentives, rewards, and benefits. This can change based on the type of card and company you choose to go with, but you’ll be spoilt for choice with so many options on the market.

For example, Vital Card offers you 1.5% cash back on all spending in addition to a referral bonus for each friend referred.

You have fraud protection

Having a single card that you use everywhere makes you more susceptible to fraud. The greater your transaction frequency with any one card, the more likely it is that the card will be hacked.

If your account or card does end up being hacked or stolen, you won’t be able to use it until a replacement arrives. Having different cards helps spread the risk across multiple lines of credit.

You’ll have backup cards

If you have multiple credit cards, you’ll always be able to carry two or three on you simultaneously. If one of your credit cards is hacked or compromised, having a backup or two provides security and peace of mind.

The cons of having multiple lines of credit

Before taking out multiple credit cards, consumer should keep a few considerations in mind:

  • Hard inquiries will increase
  • You’ll have to manage several bills

For all the benefits that multiple lines of credit give you, here are some of the cons:

Hard inquiries will increase

When you apply for a new credit card, lenders conduct a hard inquiry – also called a hard pull – on your credit history, which will show up on your report. Whether granted or declined, these inquiries will reduce your credit score. They also stay on your credit report for two years.

You’ll have to manage several bills

As mentioned before, the more credit balances you have, the more credit card bills you have to pay. You will also need to remember their due dates to ensure they’re being paid on time. We discussed how one alternative is to automate your monthly payments or change your due dates to coincide with salaries and bonuses to ensure that you remember to pay your dues in full.

How do I take advantage of multiple lines of credit?

Most credit experts suggest that you avoid using over 30% of your available credit per card at any given moment to boost your credit score. Having multiple lines of credit helps you distribute your expenditure between a larger overall amount available to you.

How having multiple credit cards helps your score

Credit utilization accounts for 30% of your credit score. By spreading your credit among numerous cards, your credit report will show low utilization across a span of accounts, rather than one account with high utilization. This low utilization will build your credit score.

Should I cancel the credit cards I don’t use?

Consider the age of a credit card before canceling it. Canceling your older cards will reduce the average age of your credit history and can lower your credit score.

Reduced credit availability may also have an impact on your credit utilization. Canceling a credit card will reduce your utilization rate, lowering your credit score.

Here’s a tip: If you have an older credit card that you don’t use but want to avoid canceling, consider using it once or twice a year for small transactions and then quickly pay it off. This keeps the card active, and your credit card company won’t cancel your card due to inactivity. If your credit card charges an annual fee, that's another cost to consider.

Which credit card should I get?

It might be quite tempting to accumulate cards and have a variety of rewards and benefits available to you; nevertheless, it is vital to examine your true credit requirement and your ability to handle it wisely.

If you’re looking for a credit card company that pays you to share and spend responsibly, join the waitlist for Vital Card.

Sources

What Is the Average Number of Credit Cards per Consumer?,” Experian.com

What Is New Credit?,” MyFICO.com

Which States Have the Most Credit Cards?” Experian.com

What Is a Hard Inquiry…?,” Experian.com

What Is a Credit Limit…?Nerdwallet

Credit Checks…” MyFICO.com

Credit Card Utilization and Your Credit Scores…” Credit Karma blog

Vital Card blog posts are intended for informational purposes only and should not be considered financial or any other type of advice.

How many lines of credit should I have? | Vital (2024)
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