Does the Number of Credit Cards You Have Impact Your Credit Score?

Do you know how many credit cards are in your wallet? While you may not realize it, the number of credit cards in your possession could potentially affect your credit score. Whether you were issued cards from a retailer or by a bank, it's important to keep track of all your cards to ensure you are using them responsibility. 

"The average credit card holder in the U.S. has 3.7 cards."

Average Number of Credit Cards
A Gallup poll found consumers use credit cards less frequently than in the past. The average credit card holder in the U.S. has 3.7 cards, according to a 2014 poll by Gallup. When looking at all U.S. consumers, the average number of cards is 2.6 cards, which includes consumers who said they do not have any cards. While the average is smaller than it has been since Gallup began recording data on credit card ownership, some consumers still have way more cards than the average.

In the April 2014 poll, 9 percent of consumers had between 5 to 6 cards while 7 percent said they had 7 or more cards. The 16 percent of consumers with 5 or more cards should be careful how they handle their credit limits and outstanding balances. 

Cons of Owning Numerous Credit Cards
Because there are benefits of owning multiple cards, you may be tempted to apply for as many as you can. There are a huge number of rewards you could earn, such as cash back on restaurant visits, gas and other purchases. You might also have the chance to rack up miles on airlines. While there are a huge number of perks with owning credit cards, there are also some downfalls. Depending on your credit standing, your credit cards could cost you by damaging your score even if you don't know it.

1. High credit utilization rate. If you have several cards, you likely have a substantial credit limit total, which could help you maintain a good credit utilization rate. Your credit utilization rate, which is included in the FICO component of "amounts owed," has a high impact for your credit score, according to Credit Karma. FICO noted amounts owed represents 30 percent of your FICO score. To understand what your credit utilization rate is divide all your credit card balances by the total credit limit. The higher your credit utilization rate, the more risky lenders could perceive your application for new credit. If you apply for cards to fuel your spending, rather than strategizing to increase your credit mix to help your score, you could potentially have a high credit utilization rate. 

" Credit card owners had an average balance of $3,573 in 2014."

2. Greater levels of debt. Although you could have plenty of lines of credit, there is a higher chance that you will have a larger outstanding balance by having multiple cards. Credit card owners had an average balance of $3,573 in 2014. About 6 percent of credit card owners said they had a balance between $5,001 to $10,000 and 8 percent owed more than $10,000. As some card holders do not pay off their balance in full each month, the remaining balance could cost them in interest. A large debt level could make it difficult for card owners to lower their amounts owed, possibly raising red flags with potential creditors.

3. Number of hard inquiries. When you apply for a credit card, lenders usually perform a hard inquiry to check your credit score. While this is done to ensure you are qualified for the card, it could result in lowering your credit score. If you have several hard inquires, this could have impacted your credit standing after the lenders performed the credit checks, which could affect your ability to be approved by credit.