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Many times I hear consumers say that they need to have a certain number of credit cards to “build their credit scores.” Credit cards can both build, but also drop your credit scores. What is a good mix of credit cards you should have?

Depth is a huge factor in a FICO® credit score. The older an account is referenced in your credit report, the higher your FICO Scores. Any credit reference that is ten years or older brings a lot of value to your credit scores. I refer to them as ‘Golden Accounts’. The only way to develop such depth is through a line a credit, or credit card.

How do you develop such depth?  There are a couple of ways. First is a major credit card account such as an American Express, Capital One or Discover Card. As long as you keep it open and periodically use it each year, that account reference will bring you many FICO Score points. The longer that credit card is open and the more ‘Golden Accounts’ you can develop, the better your FICO Scores will be.

Another option is a store card from a retailer you can periodically use. Such examples are a Home Depot, Costco or Lowes credit card. You have to use them once very couple of years to make sure they stay open. Credit card retailers like to keep your account open so that you will hopefully come back to the retailer for more purchases in the future. Retail credit cards don’t have to be used as often as regular credit cards in order to keep open. These type of credit cards can create a lot of value.

How many credit cards should you have open?  Enough to drive your FICO Scores higher. A number such as 2 to 4. You should have enough to handle your personal and any business needs. But don’t have too many because you can lose track of all the open credit cards you have. Additionally, too many credit cards in some situations can actually lower your FICO Scores.

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