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I have often expounded on how FICO builds a credit score. Since FICO uses a set approach to build a credit score with each of five criteria accounting for a certain percentage of your score, people look for ways to manipulate FICO to their advantage. One of those ways that many people wonder about is whether having multiple credit cads will actually boost their score or if having a single card is best. I am a huge proponent of having a single card that you rarely use, but let’s have a look at the topic from both sides.

The Categories

FICO uses five criteria when building a credit score and each criteria accounts for a percentage of your score. Payment history accounts for 35 percent, amounts owed is 30 percent, length of credit history is 15 percent, new credit is 10 percent, and types of credit used accounts for the remaining 10 percent. As you can see, based on this division of percentages, arguments could be made for a single and multiple cards.

Case for a Single Card

The length of your credit history can be affected in several ways. It starts when you get you first credit account that is reported to the major agencies. Usually, that is a credit card since they are the easiest types of credit to be approved for. With that card in hand, you can improve your score by making your monthly payments on time. So far, simple stuff…get a card, make payments on time and you have addressed fifty percent of your credit score. Amounts owed is a great area to make an argument for a single card. You receive the biggest boost to your credit score by having a balance that is less than 25 percent of your credit limit. Between 25 and 35 percent there is a small boost, but once your balance exceeds 50 percent, your score will actually starts to drop. Having a single card makes it easier to control your balance and allows you to make larger or multiple payments if you start to edge toward that 25 percent threshold. New credit accounts for ten percent of your score. Each time you apply for a new credit card your score dips whether you are approved or not. That dip fades over a few months. Having a single card will allow you to avoid that dip. The final ten percent of your score is built on the types of credit that you have used. Since credit cards are all revolving lines of credit, having multiple cards will not help you with this criteria either.

Case for Multiple Cards

The case for multiple cards only has footing in one area of your credit score…amounts owed. This category is often referred to as the credit utilization aspect of your credit score. If you are able to control your credit card use, having multiple cards can allow you to have a higher total credit limit. The higher credit limit can be a double edged sword if you view it as an excuse to carry a higher balance just because you have a higher limit.

There may be one other reason to have multiple credit cards. After holding a single card for years another credit card company may offer you a card with a significantly lower interest rate. If you take that offer to your current issuer and they will not match that interest rate, you may want to accept the other card and transfer your balance. Do not close the old account, though. Closing it will shorten your credit history, dinging your credit score for some time.


About the author: Jerry Coffey


Jerry Coffey spent many years in a debt-riddled gray area somewhere between broke and desperately broke. His seemingly endless need for more and more cash led him to payday loans, repossessions, bankruptcy, and depression. After years of the same financial style, he heard a piece of advice that inspired him to find a way to change. The advice: ''The very definition of a fool is someone who continues to do the same things, but expects different results.'' This led him to a much more frugal lifestyle that sees all of his bills paid on time and a growing savings account. Even the seed of a retirement account has begun to sprout.


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