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In Order To Improve Your Credit Scores, Keep Accounts Active

Posted by: Staff Writer | Sep 21,2007


One question that arises when it comes to boosting a credit score surrounds the issue of how many credit cards to hold. Many people seem to feel that the conventional wisdom is to hold as few as possible or even none at all. While holding too many credit cards may be a problem, you may be surprised to learn that going to the other extreme can be just as big a problem.

Creating a Good Credit Picture

A credit score is a guide to lenders as to how good a risk a potential borrower might be. They want to see a picture of how you manage credit. A picture that consists of many maxed out credit cards that have been charged off with the accounts closed is not necessarily the picture you want to paint. The danger of multiple credit cards is that cardholders tend to use most of their available credit, showing lenders that the cardholder tends to keep borrowing until they are at their limit, rather than that they keep credit available by making regular payments.

Handling Your Credit Cards

Having multiple credit cards with plenty of available credit left on them can be good for your credit. This yields what is called a high utilization ratio and it is what lenders are looking for. Having three or four open credit card accounts where half or more of your maximum credit limit is available can be much more attractive to lenders than one or two credit cards that are maxed out, even if the amount of debt you are carrying is similar in both instances.

Using Open Accounts to Your Advantage

If you can transfer some of your credit card balances to cards with higher limits and lower interest rates, this may help create the credit picture you are looking for. If you are going to close some accounts, try to keep some of the older ones open. This will indicate to lenders that you have a long successful credit history with one or more companies, which makes it seem more likely that the potential lender can have a long successful credit history with you. The ideal number of credit card accounts for creating an attractive credit picture is probably about three or four. Too many more than this may be a red flag to lenders who may wonder why you need so many available lines of credit.

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