What’s My Credit Score? Excellent, Despite Lots Of Cards… Here’s Why

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Let me give an example. Say you have 10 credit cards, and have a $10,000 credit line on each. That means you have $100,000 of available credit. If you spend $90,000 on your cards each month, you’re utilizing 90% of your credit. That looks risky to the banks, because they start to wonder if you’re getting close to charging things you can’t actually pay for.

Conversely, if you have $100,000 of available credit but only spend $1,000 per month, you’re only utilizing 1% of your credit. If you apply for new cards, the banks view you as low risk, because you’re clearly not trying to max out your credit lines.

It actually helps to have a lot of cards, so that your overall available credit is high, while your utilization is very low. There’s one other trick here — pay off most of your credit card balance before the statement even closes. In other words:

• Say the closing date for a credit card is April 1
• The payment due date is usually a few weeks after that
• I simply pay most of my credit card bill two days before the statement even closes (in this case, March 30)
• That’s because what’s being reported to the credit bureaus is your utilization at the time your statement closes; so even if my credit line is $10,000 and I spend 90% of that, if I pay off most of that balance before the statement even closes, then the utilization rate will be super low

Keep some cards for a long time

15% of your credit score is made up of your credit history. One thing that largely factors into this is your average age of accounts.

A great solo travel tip spotted this week on One Mile at a Time.