Is Your Credit Score Affected by the Number of Cards You Have?

Your credit scorealso called your FICO score, is a measure that creditors use to assess your potential creditworthiness. Generally speaking, the higher your credit score, the less credit risk borrowers will perceive you. If you have a low FICO score, you might be considered a higher credit risk. Having a high credit score will help you get a loan for big-ticket items like a car or house, and will also help you get more favorable terms than if you had a lower credit score.

How FICO is weighted

The Fair Isaac Corporation, the creator of the FICO score, does not disclose exactly how they arrive at each individual FICO score. The company does, however, detail the different weights it assigns to different aspects of a person’s financial situation. Your payment history makes up 35% of your FICO score, while your total debt owed amounts to 30 percent of your final FICO score. The final 15, 10, and 10% of your FICO score are the length of your credit history, any new credit you’ve taken out, and the type of credit you’ve used.

How the number of credit cards you have influences your score

When calculating your individual FICO score, the number of credit cards you own will influence the smallest weighted category: the type of credit you use. Although this is given the least weight in the calculation of the FICO score, it does not mean that the number of credit card you won’t matter. The more credit card accounts you have, the more credit you will have at your disposal.

If you were to increase your debt, it could prevent you from paying the new loans you have accepted. Therefore, if you have fewer credit card accounts, you will have less credit available to you, which will increase your credit score. However, managing a small number of credit cards responsibly can give you a better credit score compared to someone without a credit card, as not having a consistent payment history is considered riskier. . Either way, it’s always better for your credit score to pay off your credit cards in full each month than to keep a balance.