Q. I have seven credit cards but really only use one. I know that canceling cards can affect your credit score. What do I do with the cards, and if I have to cancel, how do I decide which ones? They all basically have the same interest rate, but I don’t keep balances anyway.
A. We’re glad you’re paying attention to your credit.
There is no hard and fast rule on the best number of credit cards.
If you’re handling all the payments and it looks like you are, here’s what you should consider before getting rid of any of them.
If you want to close one or two cards, you need to consider the length of the credit history, the card’s payment history and the credit limit, said Debra Ohstrom, Chartered Financial Analyst and Financial Educator. .
If it’s an old card and you’ve used it in the past, but you don’t use it anymore, you don’t want to lose that reliable payment and long credit history. she stated.
“At least 30% of your credit score factors in a reliable payment history, so that’s really important,” she said. “Creditors like to see a reliable payment history and the longer the better, it shows that you are responsible and stable.”
The other thing to consider is the credit limit.
Ohstrom said that even if you don’t use the card, if it has a high limit, it’s good for your score.
“Having a lot of available credit and not using it means you have low credit utilization, which is an important part of your credit score,” she said. “If you can keep your credit utilization below 30%, that’s ideal.”
If you cancel lots of cards, you’ll lose history and your available credit will decrease, which will likely lower your credit score, she said.
Having three cards is definitely a good thing and five is no problem, especially if you don’t overdo it, she said.
“It would also be helpful to review your recent credit report and see if there are any comments regarding your score,” Ohstrom said. “If your credit report contains comments about large amounts of revolving credit or your payment history, this can help you make a decision about the best course of action for you.”
Send your questions to [email protected].
Karin Price Mueller writes the Bamboos column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Register for NJMoneyHelp.comit is weekly e-newsletter.