We want to take a second to talk about credit cards and the role they play in determining whether adding authorized user tradelines is helpful or not.
Here’s a rule of thumb – the more young credit cards you have, the more age you need to add to your reports to make a positive impact on your credit score.
How many credit cards is too many? Here’s some examples:
Limited and young credit.
Bill has 1 open credit card that is 6 months old on his credit report.
In order for Bill to reach an average revolving age of 2 years, he would need a 3-and-a-half-year-old authorized user tradeline.
Average and young credit.
Sue has 5 open credit cards that are each 6 months old on her credit report.
In order for Sue to reach an average revolving age of 2 years, she would need a 9-and-a-half-year-old authorized user tradeline.
Extensive and young credit.
Jack has 10 open credit cards that are each 6 months old on his credit report.
In order for Jack to reach an average revolving age of 2 years, he would need a 17-year-old authorized user tradeline.
Too many cards = frustration.
Jack may have opened all those cards because he was trying to build his credit.
Building positive revolving history with accounts in your own name can be great, and really, it’s one of the best ways to achieve excellent credit.
But, there is such a thing as TOO MANY credit cards and it can really put you in a tough position.
Lately, we’ve been seeing quite a few clients with reports similar to Jack’s – lots of young credit cards.
These clients are coming to us frustrated because they applied for credit cards, they’re making payments on time but not seeing the gains they hoped for and it’s tough to help them make an impact with authorized user tradelines.
In our 24 page study, those with lots of credit gained the least.
The average change in credit score across all three bureaus was a 35-point increase for individuals who started the research with a credit score. This also makes sense because adding a tradeline to an existing score will dilute the impact of the added tradeline since there are factors beyond just the tradeline taken into consideration when determining the score.
Too many cards looks risky, too.
Not only will having too many cards keep you from making a quick impact with authorized users, if you have too many credit cards, you can start to look risky to lenders. This is especially true if those cards are young in age.
In fact, some banks have rules in place that will reject applications if too many credit cards were obtained within a couple years. This remains true regardless of what the rest of the credit looks like.
Too many cards; what now?
So, the big question is, what do you do if you are in this position – if you have a large number of young credit cards and your credit is stuck?
First, you’ll want to avoid the instinct to start closing cards as that can make things worse.
Instead, keep the cards paid off (and be careful not to put yourself in a situation where you’re trying to manage too many cards as it can get confusing and increase the risk for incurring late payments).
And, allow yourself to build history.
Understand though, it won’t happen overnight.
Final thoughts on “How many credit cards is too many?”
Choose the cards that offer you the most benefit such as rewards, points, cash-back, etc. and try to limit the bulk of your activity to those.
As time goes on, your average age will increase and you can ask for limit increases or ask the bank if it’s possible to trade for a better card.