How Many Credit Cards Should You Have if You Want to Raise Your Credit Score?


At we enjoy helping people understand credit cards, and we frequently get great questions from our readers. Here’s a really smart question written by someone who wants to raise their credit score in order to get a car loan:

I’ve never really paid much attention to my credit score, because I only have one card and almost never use it. When I do use it, I pay it off as soon as I can. I just figured that was good enough, you know? But I went to get a car loan last weekend and they turned me down. So, I’m wanting to know: How many credit cards do I need to get a good credit score? Why would I get turned down? I haven’t made any late payments.

Thks ML

Thanks for your questions ML. The answer is a little complicated, but I’d do my best to help clear everything up. There are three credit bureaus, and each one uses a variety of information to calculate your credit score. It’s not just about whether or not you pay things on time, unfortunately; (though that is a large part of your score.).  You’ll have to be much more aggressive to make a real change in your credit score, and your appearance of credit worthiness to lenders of all kinds.

Here’s your basic plan of action. We’ll explain why just below:

Step 1: Get a free copy of your credit reports from Annual Credit Report

Step 2: Check to make sure that your identity has not been stolen, and that all of the information in your reports is accurate. If it isn’t challenge it, and get the correct information put on there.

Step 3: Start using the credit card you have regularly. Pay it off every month to avoid the interest. Your score won’t go up if you don’t have a regular record of payments.

Step 4: Apply for a couple of additional credit cards (not all at the same time, wait a few months in-between). Use them, and pay them off each month.

Step 5: Never charge more than 15% of your total credit on any credit card. This behavior combined with regular, on-time monthly payments will raise your score the fastest.

Step 6: Monitor your credit scores until they get into the 700’s. At this point you should not have any trouble getting a loan on a car.

So that’s your plan of action. Here’s the “why” behind the “how”:

Your credit score is determined by a variety of factors (including timely payments), but you need to know what they are, or you’ll just be chasing your tail all the time.  See, credit card issuers could report late payments at 5, 10, 15 days past due.  Some companies don’t report until you’re 30 days past due.  It just depends, but 30 days is the norm.  So, you could have a great payment history, but there are people who are paying 10-15 days late who are not any worse off than you are.  This may sound a little harsh, but the “I’m the creditor’s pet” approach probably won’t work out for you.

Plus, you have to have revolving credit that has belonged to you for quite a long time.  For example, I could open an American Express Gold Card tomorrow.  Woohoo!  I’ll have had it for all of four seconds, but that’s not going to change my credit rating.  It looks nice, I’m sure, on my credit report, but it isn’t moving the meter.  My Dad, on the other hand, has had his AMEX Gold Card for 40 years.  So, he’s been paying on time for 40 years.  I’ve been paying on time for 40 seconds.  He’s getting much more of a bump on his credit score than I am.  Why?

Well, the length of time you’ve owned the credit makes a difference.  If an issuer sees that you’ve been good with credit for long periods of time, they won’t think twice about giving you more because, well, you’re good at it.  If you’re still “young” on credit, they may not know what to think about you.  That leaves everything up to the discretion of an underwriter or loan officer.

What type of loans are you already paying on?

Well, the kinds of credit that’s listed on your credit report matters.  Let’s say you have a car note, mortgage, and four or five credit cards, those are perfectly normal.  A good history on car loans and mortgages is good for you, at least on paper. It gives you a regular history of payment. Every time you make a payment on time, your credit score gets a little better.

There is also a bit of a cumulative effect to credit. The more lenders that have approved you for something (and that you have paid back) the more likely future lenders are to approve you for a loan. That makes getting that first-ever car loan a little difficult. It’s a catch 22, you want the loan, but have never had a loan of that type before, so you are having a hard time getting approved. You will find the process gets easier the second time around.

How Many Credit Cards Should You Have To Stay Healthy?

The general rule of thumb is three to five.  Now, you could have six and that would be ok, but you’ve got to be smart about how you get them, how you use them, and when you get them.  Think about it for a minute.

You cannot, under any circumstances, apply for four or five credit cards at the same time. The credit inquiries will show up all at once on your credit report, and will lower your credit rating.

Slowly accumulate three to five cards.  Take your time, and you will be rewarded.  Use them every so often, and pay them off as you use them.  At the very least they need to be paid on time, and you should be OK.  If you carry a few cards that are in good standing, you picked up over time, and that are being used that really helps.  Sure, a card that has a zero balance and doesn’t get used is fine, but activity that is being paid off is even better.

Monitor, Monitor, Monitor

Get those free credit reports, and maybe join a service to make sure you can keep an eye on your credit.  It’s a good way to track the effects of your activity on your rating, and to see how things are being reported.  You don’t just monitor your credit for vanity’s sake.  Looking it over and saying, “Wow, I have a 723.  Good job, buddy!” *patting yourself on the back* is cute, but not the point.  Let’s say right now you have one credit card and your credit score is 650.  Then you spend a few months with two cards and it goes up to 662, you know you’re making progress.  It’s either that or constantly guess and never know when the right time to apply for that auto loan is..

Your credit score should never be a surprise.

After that, you’re going in to buy a car knowing your credit score and knowing exactly what your report says.  You can counter objections, higher rates, obscene terms, etc. with your own knowledge of your credit report.  They may not like a smart customer, but they won’t be able to argue with you either.

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