Your credit report spills out “secrets” you may have forgotten about, long ago. It could be an unpleasant surprise to discover a large number of credit card accounts listed, but hold your horses… Take a closer look! There may be the account you opened to enjoy a 10% discount on a special vacation, your first credit card that you stopped using long ago, the credit card you took to furnish your house and who knows what else?
The silent question that remains is: “How do all these listed accounts affect my credit scores?” And you’d definitely wonder whether there aren’t a bit too many credit cards there.
The number of credit cards does NOT influence the credit scores in a bad way, on the one condition: that you don’t have much debt. The credit score illustrates the way you manage your credit cards, and the number of accounts is not taken into consideration for calculating those scores.
In order to find out where you stand, ask for a free credit report. You can get an monthly updated credit score online, together with information on the major issues that could affect your score on the long run. The suggested action plan that accompanies the report could make the difference between being in debt and out of debt.
You could even reap the benefits of old credit cards, as their age and utilization could have a positive impact on the credit scores.
The Age of the Account
There is one important situation when having old credit card accounts helps. Scoring models evaluate the credit based on the analysis of certain factors such as: the age of the oldest account, the average age of all your accounts and the opening of a new account. If you have a long-established credit history, you can get a better score on your report. Therefore, those unused accounts you opened a long time ago, could still help.
Yet, not all old accounts remain open indefinitely. Credit reports may no longer show an account that has had an inactivity period longer than 10 years. This is the case with Experian reports. It may be a good idea to use your old credit card every once in a while so as to keep it active and prevent it from being deleted. Yet, if you have lots of such old accounts, getting one deleted does not mean much for your credit history. Nothing to lose in there!
Balances make the difference!
The majority of scoring models analyze the existing limits on your revolving accounts (i.e. credit cards), with the balances they carry. Utilization is the name for this! Scores may not be that good for the utilization factor if you have a rough use of 10 – 25% of your available credit on each card or on all of them globally. If the balances are below this percentage, then, you get a better credit score. In case there are no balances on those cards, the available unused credit helps with the utilization factor. In layman’s terms: you have more credit available, and your credit score is higher.
If you have balances on more credit card accounts, your credit scores may suffer significantly. If credit card debt has accumulated, you need to make a plan to pay it down. This will bring savings with interest rate and will improve credit scores.
Get a better understanding of the factors that trouble credit scores by getting a free credit report from Credit.com. The information on credit history, age and debt level is revealing and helpful for you to take action towards a debt-free life.
To put it in a nutshell: you can get as many cards as you like. As long as you manage them efficiently, keeping balances low and paying them on time, you are safe!