Curt F asked:


Hi everyone.
I’ve been spending alot of time contemplating credit score issues and I am now considering applying for 4 new credit cards at once. However, I plan on never activating the cards for use or charging anything to the accounts.
I know my score will take a big hit for this one day of hard inquiries, but I think that in the long run it will greatly benefit my score because of the large increase in available credit with no increase in used credit.
But at the same time i’ve heard that when I go to apply for a mortgage, the banker will probably notice my available credit and use that against me.
My question is - what are all of the possible downsides of having many credit cards besides the obvious temptation of spending money you don’t really have?

Thanks so much for your help and I’m looking forward to your advice.
Thanks for the great responses - my score averaged from the three bureaus is 736 and all the offers were approved. In all honesty, my company’s stock just hit a 3 year low, so I am going to 0% cash advance the credit into my corporate discount ESPP program and flip the shares. I know this is not encouraged by most corporations - but hey the free money is hard to pass up.
Then I will reimburse the cards and let them sit until I see another opportunity of this sort. Thanks again!

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5 Responses to “What are the downsides to having several credit cards?”

1. Caffeinated Content - Members-Only Content for WordPress on February 28th, 2008 8:25 pm

   Kansieo.com

   Only apply for what you need. The downside is that if you just open accounts and never use them, then you have got a potential liability that will be used against you. Eventually, the card companies will close the account due to lack of use.

2. Caffeinated Content on March 2nd, 2008 6:48 pm

   Caffeinated Content

   Well, you answered your own question: But at the same time i’ve heard that when I go to apply for a mortgage, the banker will probably notice my available credit and use that against me.
   This is actually a downfall. If you secure credit cards, even if you don’t use them, they will show on your credit report and extend your available credit. The smarter thing to do if you want to increase your score is to activate one or two and use them, pay them off, use them, pay them off.

3. Caffeinated Content on March 2nd, 2008 11:25 pm

   Caffeinated Content

   Well, the fact that you will have several thousand dollars available to you that you’re not using will prevent you from getting more credit elsewhere - including an increase on a card you already use, or a loan, mortgage, etc. It doesn’t matter that you’ve never activated the account, or that you don’t use any of it - it’s still there under your name. And if you ever need to apply for a loan/mortgage, even if you close those accounts, most credit card companies update with the credit bureau once per month, so you’ll be stuck waiting for that to show on your report. To maintain good credit, it is recommended that you use 50% of your available credit. So, if you have a $2000 limit, you should have a balance around $1000 to maintain a good credit rating. (Obviously paying off your account in full each month will give you an excellent rating, but that’s not always possible.)

   You already know that applying for 4 cards at once will f*ck up your credit, so I don’t need to tell you about that. Although, I would highly recommend not doing it. If you feel you need to, spread it out by applying to one every 6 months or so. Any marks on your credit (besides bankruptcy) stay on your report for 6 years.

   I also want to add that if you apply for several cards at once, you will appear to be a higher credit risk - it will make the credit companies wonder why all of a sudden you need so much credit, as in you don’t have enough money to sustain yourself.

4. Caffeinated Content for WordPress on March 3rd, 2008 5:38 pm

   Caffeinated Content

   Before you apply for 4 cards, do you know if your credit score is high enough that you know you’ll be approved? Are you applying at banks that will approve you? (In other words, have you done your homework first?)

   But assuming you know your score is good and you are applying at banks that will likely approve you, I see no problem with your plan. Your score will dip for about 6 months, and as long as you don’t need credit within that time, it won’t even matter.

   The concept of “they will count my available credit against me” is a myth. What matters is how you manage your credit. You already know that from your research into credit scores. And if for some odd reason you apply for a mortgage some day at a place that says they can’t approve you with that much available credit, you can simply close the accounts at that time. That would solve any problem, but that’s not going to happen. I got approved for a mortgage with 14 open credit cards. 13 had zero balances, and all they cared about is how much I owed in total.

   Keep in mind if you never activate the cards or use them, you risk having the accounts closed without your consent. You should activate the cards and use each one at least once every six months so they stay open.

   But if you are not absolutely sure you can handle the increase in available credit… if you think you might go out and run up the balances on the new cards… then please do yourself a favor and do not apply. It’s not worth the risk.

5. Caffeinated Content on March 6th, 2008 1:00 pm

   credit cards

   I can’t even try to answer this question better than Likepepsi did. He hit the nail square on the head.

   Total credit available does not equal debt. I have 16 credit cards, and I have a debt load of $45. Now, I wouldn’t advise everybody to have that many (some are for business only, associations I am affiliated with etc.; I also have multiple lines each with a few banks. having more than a few cards with zero negative information on my reports allows me to really get the best deals, and show potential creditors how responsible I can be. My mortgage broker didn’t even waste time looking at my total credit available.

   While diversification is important, I have to ask as well: what is your credit score? Do you know that you have a decent chance at approval, or are you just going to rack up some needless inquiries? If you are going to leave the cards unactivated, why bother?

   Mortgage-wise, having a lot of credit should not hurt you. It is a myth. I have heard that a few creditors will not even report unactivated cards to your credit report. While I believe that that is rare, it is something to consider.

   Bottom line? Likepepsi said it best. If you cannot handle more, leave as-is.

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