Table of Contents
- A credit profile with less than five credit accounts may appear “thin.”
- Focus on what’s in your control, like your credit utilization and payment history.
- Opening credit cards that align with your main spending categories can help you earn meaningful rewards.
- Americans have an average of 3.84 credit accounts, with an average credit limit of $30,365.
The Ideal Amount of Credit
There is no specific or “magic” amount of credit that an individual should have. That said, a “thin credit file” — one where there isn’t a sufficient amount of credit history to generate a credit score — is typically one with fewer than five credit accounts.
Alternatively, lenders may deem your credit file too thin if the accounts haven’t been opened for a substantial amount of time. When lenders decide to work with you, they want to be confident that you’ll pay them back on time and in full. If your file is too thin, they might not have enough information to determine your credit score, thus leaving them unable to evaluate your creditworthiness.
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Focus on Improving What You Can
Rather than attempting to optimize for details like the ideal number of accounts, focus on improving the aspects of your score that have more specific guidelines.
Credit Utilization
Credit utilization is the amount of total available credit you’ve used up. For example, if you had three credit cards, each with $5,000 credit limits, you’d have $15,000 total credit. A balance of $3,000 across the three cards would result in a 20% credit utilization ratio — assuming you have no other credit.
The trick here is to make efforts to increase your available credit while maintaining a lower spend. Simply reach out to your credit card company and request a limit increase.
In our example, let’s say one of your credit card providers agrees and increases your limit from $5,000 to $10,000. Now, you have a total of $20,000 available credit and a $3,000 total spend. This lowers your credit utilization ratio to 15%.
A credit utilization ratio that is too high can indicate that you’re relying too heavily on credit or overextending yourself financially — neither of which are appealing to lenders. The lower your credit utilization, the better, although experts recommend keeping it at 30% or lower.
Payment History
Your ability to make on-time payments makes up 35% of your FICO credit score. If you’re concerned about missing payments, turn on autopay so bills are paid automatically.
Credit Diversity
While having a few credit accounts can help your score, it’s important to focus on diversity as well. Opening six credit cards doesn’t look as financially responsible as having two credit cards, one mortgage, one car loan, and two student loans.
Credit Card Recommendations
If you decide to open a new credit card to diversify your credit mix or increase your available credit, select a card that aligns with your spending habits. For example, some credit cards are better for earning cashback on dining, while others are better for people that spend more on hotels.
Keep in mind that there’s no exact number of credit cards that an individual should have. Prioritize financial discipline above all else — if you’re unable to manage credit cards responsibly, it’s wise to hold off on opening one.
Once opened, make timely payments, regardless of the number of cards you have. This is another instance when putting payments on autopay is wise, as it guarantees you never miss a payment.
Bottom Line
There isn’t a universal recommendation for the number of credit accounts an individual should have. It depends on the overall credit profile of the individual and their ability to effectively manage the accounts they open.
Instead, focus on managing credit utilization, not opening excessive accounts, and ensuring timely payments.
Frequently Asked Questions (FAQs)
What Is Considered A Good Credit Utilization Ratio?
Experts recommend using no more than 30% of your total available credit.
How Does The Number Of Credit Accounts Affect Credit Scoring?
Having a mix of credit can show lenders you’re capable of managing credit effectively. However, having too many credit accounts can indicate that you’re overextending yourself. This information is factored into the “credit mix” portion of your score.
Is There A Limit To How Much Credit One Can Have?
No. There is no upper limit on the amount of available credit one can receive.
Is There A Limit To How Much Credit One Should Have?
There isn’t a magic answer here. If you’re interested in opening a new line of credit, look at your score first. This may help you predict how an additional line of credit may impact your score.
How Much Credit Does The Average Person Have?
According to the latest research from Experian, Americans have an average of 3.84 credit card accounts. The average credit limit is $30,365.
Keep in mind that individuals surveyed might be mismanaging their credit — there’s no way for us to tell. Monitor your own credit profile before making decisions, rather than basing your actions solely on the averages.
Is It Bad To Have A Lot Of Credit Cards With Zero Balance?
It isn’t bad to have a lot of credit cards with zero balance. However, this doesn’t mean you should open several cards and not use them.
Making small purchases each month and paying them off by the due date is a smarter approach. This allows you to build a strong payment history, which can improve your score.
Find out more
- Credit Score Optimization – Learn how to positively influence your credit score.
- Defining a Strong Credit Score – Understand what makes a credit score robust and healthy.
- Credit Monitoring Essentials – Discover how credit monitoring can be a key to financial security.
- Roadmap to Credit Repair – Navigate the process of improving your credit with ease.
- Lowest Credit Score Challenges – Addressing the concerns of having the lowest credit score.
- Credit Repair Investment – Evaluating the cost of repairing your credit.
- Credit Report Cleanup – How to tidy up your credit report for accuracy.
- Impact of Credit Checks – Delve into how different credit checks affect your score.
