How Many Credit Cards Do You Have? You Sure About That?

There are a lot of good reasons to know your credit score and monitor it. When it comes time to apply for a mortgage or and other kind of loan, your lender will check that score and you don't want any surprises. One thing that may affect your credit score is your credit card utilization.

What does that mean? The percentage of your total available credit that you actually use. For example, if you have three cards, one with a limit of $1,000, one with a limit of $3,500, and the third with a limit of $500, and you currently owe $2,000 total, your credit card utilization is 40 percent. You have $5,000 worth of credit available to use, and you're using $2,000 worth. In general, your utilization should be less than 30 percent.

So...you should open a bunch of credit accounts and not use them, right?

Wrong.

Creditors also like to see that you're managing the credit available to you responsibly, and using it. Paying off your balance every month and rarely incurring interest charges looks good.

Having ten credit cards you don't use? Not as good.

We've all done it. You get to the checkout counter with two new pair of shoes, a pair of jeans, and two blazers (which you need for work, so they're totally justified, even if they are really nice). The helpful person ringing up your purchase chirps, "You know if you apply for our credit card, you'll get 15 percent off your purchase today, right?" So you do it. Because who can resist saving $100? Would you walk past $100 on the sidewalk? Of course not! You leave with your new stuff, totally forgetting about the new card. A few weeks later, you get the bill in the mail, and pay it immediately, because you were going to pay with a debit card, so you just left the money in your account and waited for the bill to arrive. You've done this before -- and it's saved you plenty of money -- and you know the drill.You did everything right!

Almost. When you paid the bill, you should have canceled the card at the same time. Have you checked your credit report recently? If not, you should. You may find that you have several accounts that you used once, just to get a discount or special deal, that have been lying dormant, with a zero balance. That available credit could affect your credit score and could also help determine how much (or how little) credit you may be offered by another creditor.

Check your score: If you have a bunch of open accounts that you aren't likely to use, contact the creditors and close them.

One of the best things you can do for your credit is manage it responsibly. Pay your bills on time, use credit wisely, and make sure you keep an eye on it, so you always know where you stand.