Does Having More Credit Cards Raise or Lower Your Credit Rating?

You usually need a credit card to have an excellent credit rating, but additional credit cards can wreck your credit score. Like anything in your credit report, you control how a credit card impacts your credit score. As long as you keep a low balance and at least make the minimum monthly payment, more credit cards usually help your credit score.

Identification

Opening more credit cards usually has a negative short-term effect on your credit rating but a positive long-term effect. You usually need several credit cards on your credit history to have a good mix of credit. However, the inquiry for a new credit card lowers your credit rating by up to 5 points and new accounts lower the average age of all of your accounts, worth 10 percent of your credit score, according to the Fair Isaac Corp.

Considerations

Once you acquire more than seven revolving lines of credit, such as home equity lines of credit and credit cards, your credit score takes a hit, according to Dayana Yochim of The Motley Fool. How many points you lose depends on other data on your credit report, such as debt load and missed payments.

Credit-Utilization Ratio

The portion of your total credit limit you use--also called credit utilization--can be a huge factor in whether you have good credit. You should not use more than 35 percent of the credit limit on any one card or the aggregate limit across all revolving lines of credit, and a credit-utilization ratio of less than 10 percent does the least amount of damage. For example, if you max out a credit card and have a credit score above 780, you may lose more than 45 points and probably not less than 25, according to Ellen Cannon of Bankrate.

Tip

Most consumers have an optimal revolving line of credit to installment loan ratio of 2:1, according to Dawn Allcot of MintLife. However, you should not take out more credit cards to support your lifestyle. If you already have a high credit-utilization ratio, more credit may be a bad thing. Also, you can lower your credit-utilization ratio without a new line of credit by asking your lender for a limit increase.