You’ve probably heard that having too many credit cards can be detrimental to your credit health, but not according to FICO spokesman Anthony Sprauve. In a recent interview with, he shared this interesting piece of credit information:

“The average person with a FICO score above 780 — considered a very good credit score — has three credit cards that report a balance”

Clearly, multiple cards with an outstanding balance is not a death knell to your credit rating many people assume it is.

It is important to note however that carrying too much on your credit cards is detrimental to your credit rating. Here’s why, and what you can do to game the system to get a quick – and lasting – boost to your credit score.

The magic credit score ratio

One of the major factors credit companies use to determine your credit score is called the “utilization ratio.”

This is the amount of debt you owe divided by the total amount you can borrow on the card (known as the credit limit).

The lower your utilization ratio, the better and anything over 30% can ding your credit score. Incidentally, I know a lot of people who never use credit cards and think that it helps their score. It doesn’t. Not using their credit cards is actually hurting their score. They have no history irresponsible credit card use, but they also have no history of responsible credit use. They have a utilization ratio of 0%, and they are a complete mystery to credit agencies.

So, you want to stay above 0 and below 30%. It turns out that the sweet spot here that will raise your score the most is between 0-10%.

Slice, dice and repackage your spending.

Common advice for keeping your credit score in good shape is to charge less than 30% of your available balance, and pay that off every month. This helps build the history of responsible credit use that lenders are looking for, but there’s a faster way to boost your credit score.

Remember how the average consumer with a ‘very good credit score” has 3 credit cards? Not only is that not an automatic hit to your credit score, it can also be the means with which you can amp up your credit score quickly.

Here’s how…

Let’s say you typically charge $1,000 a month on your favorite card and pay it off every month, when your statement comes due. This card has a limit of $5,000. This puts your almighty utilization ratio at 20% (1,000 / 5,000). Not bad. You’re well under the 30% danger zone, but you could do better.

NOTE: You could spend even less and decrease your utilization ratio, but this tip is really for people who cannot reduce their spending. I myself have gone as low as I would like on my living expenses, and prefer to charge as much of those necessary expenses as possible to receive maximum rewards (cash back) from my credit card company.

Now let’s say for the sake of example that you have 2 other credit cards that also have $5,000 credit limits. If you split that $1,000 per month in charges among the 3 cards more or less evenly ($300 on one, $350 on the other 2) then you end up with utilization ratios of 6%, 7% and 7% or a total of (drum roll please)….. 20%.

But wait, what happened? I thought this was supposed to improve our credit score, but it didn’t change the magic ratio.

It’s true that this amounts to little more than a mathematical shell game in terms of the utilization ratio – all we did is split the total up and move the numbers around – but the reason this boosts your credit score is not because of a lower ratio, but because you now have 3 lenders reporting your responsible financial behavior to the credit bureaus instead of just 1.

Bonus tip

Since you’ve made it this far, I’ll give you one more credit score bonus tip before I go…

To maximize your credit worthiness, you need a long credit history and a low utilization rate. To get the absolute best utilization ratio, pay your credit card balance off in full before the statement’s closing date – not the due date.

Since credit card companies typically only report the outstanding balance on the statement in any given month, they will be reporting $0 – given you a 0% utilization ratio.

But a 0% utilization ratio is bad too, right?

Right – for the long term.

The key is to only do this in the month or two leading up to when you apply for the loan. Doing this routinely will make it look like you never use your credit cards at all, and diminish your overall history of credit worthiness.

Using these credit tweaks should help you get the most favorable interest rate when applying for a new loan, or refinancing an old one. The rest is up to you.

This was a guest post by Joe Morgan. Joe is a personal finance blogger and owner of Simple Debt-Free Finance, where he writes about insurance, investing and avoiding debt (among other topics). He lives on a single income with his wife, 3 kids and a cat named Boo. He is also quite fond of Beethoven.



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