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How Many Lines Of Credit Should I Have?

Emma Tomsich5-minute read
December 02, 2021

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If you’re like most consumers, you care a lot about maintaining a high credit score.

Maybe you have one or two lines of credit and are interested in adding another, or maybe you’re worried that you have too many lines of credit. In addition to payment history and amounts owed, the number of credit lines you have can affect your credit score.

When determining how many lines of credit you should have, it’s important to know that there is no formula or magic number. Because the number of credit scores one has can vary from person to person, you should consider your spending habits and ability to manage credit before deciding whether to add another line of credit or not.

Let’s evaluate what factors can influence the ideal number of credit lines you should have.

What Is A Line Of Credit?

 A line of credit is a sum of money that a bank or credit union has agreed to lend a customer. This number comes with a maximum loan amount that the customer can borrow from but not exceed. The borrowing terms are set in an agreement that includes the credit limit and other requirements including timely minimum payments.

How Do Lines Of Credit Work?

Before discussing lines of credit further in detail, it is important to distinguish them from loans. When you receive a loan, you get one lump sum of money that you immediately pay interest on regardless of when you use the funds. On the other hand, when you take out a line of credit, you can borrow money when you need it and not pay interest until you borrow.

The terms of the line of credit, such as amount of interest and size of payment, are set by the lender. However, the borrower can decide to secure their line of credit with collateral or keep it unsecured, the latter of which typically resulting in higher interest rates.

Generally, having a higher credit score can help you qualify for a lower interest rate. Some lines of credit can come with additional fees and limit the amount of money you can borrow.

After you qualify for a line of credit, you’ll enter the “draw period.” This is a set time frame for when you can draw money from the account. When you’re ready to borrow the money, you can use special checks, a card, or you can transfer money to your checking account.

Once you borrow money from the line of credit, you can pay the entire outstanding balance or make minimum payments on your interest. If your draw period ends and it is still not paid off, you will have a set time frame to cover the remaining balance. It’s important to note that only paying the minimum payment can cost you more in interest in the future.

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How Many Lines Of Credit Should I Have?

Now that we’ve talked about lines of credit, it’s time to decide how many you should have. First, let’s review what factors make up your credit score.

What Factors Make Up Your Credit Score?

When it comes to credit scores, FICO® is the most commonly used credit score by lenders and card issuers. FICO® scores are comprised of data from the three main credit bureaus and are calculated into a three-digit number ranging from 300-850. There are five major factors that determine one’s FICO® score.

Here’s the breakdown:

Payment History

Your payment history makes up 35% of your FICO® score and is the most important factor when determining your overall credit score. Payment history looks at previous credit cards, student loans and mortgages to see if you’ve paid past accounts on time. The longer you’ve managed accounts and paid your bills on time, the stronger your payment history will be. If you’ve recently fallen behind on your bills and your credit score has lowered, you might want to wait before taking out a line of credit so that you can improve your credit score and your payment track record.  

Amounts Owed

The next important factor is amounts owed, which makes up 30% of your total credit score. This factor examines how much money you owe on your accounts and how much credit you have available. Owing money on your credit accounts is not always a bad thing, but just make sure that you are not using up too much of your available credit. If you already owe more than you can handle, it might be best to wait before taking on more interest and payments.

Length Of Credit History

The length of your credit history makes up 15% of your FICO® score. This number considers the age of your oldest and newest accounts as well as an average of all your accounts. It also takes into account how long it’s been since you’ve used certain accounts. Generally, the longer your credit history is, the higher your credit score will be. If you have a history of good credit and you haven’t opened an account recently, a line of credit might be a good option for you.

Credit Mix

Your credit mix, or number of credit lines, makes up 10% of your FICO® score. This factor considers your mix of credit cards, retail accounts and loans. Though you do not need to have each type of credit, it’s important to show that you can handle a diverse portfolio of credit lines. If you’re looking to take on a different type of credit and you have the means to manage it, a line of credit might help improve your credit mix.


New Credit

The next 10% of your credit score is calculated by how many credit accounts you have opened recently in a short period of time. This is called “new credit” and can be especially detrimental to those who don’t have a long credit history. If you have recently opened a line of credit, you might want to wait a while before opening another.

Don’t Use A Line of Credit If:

  • You know you can’t afford your payments. If you default on your payments, your credit score will be hurt and the lender might take possession of your collateral.
  • Your income is unstable.
  • You’re using the line of credit for basic needs or short-term expenses.

Debt Consolidation Loan

If you have multiple lines of credit, make sure to pay them off. Having too much debt can be problematic and as a result hurt both you and your credit score. That said, if you’re accumulating debt, consider a debt consolidation loan. A debt consolidation loan can provide you financial relief by lumping your debt together and paying it off at once.

Debt can be scary, and everyone’s financial situation is different. Before you decide on whether or not to take out a line of credit, weigh all of the pros and cons, speak to a professional and make sure it’s something you can handle.

For a free credit report and tips about raising your credit score, visit Rocket HQ.

Create a Rocket Account today.

Track your credit, manage your personal finances and get ready to buy a home.

RocketHQSM has partnered with CardRatings for our coverage of credit card products. RocketHQ and CardRatings may receive a commission from card issuers.

Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.

Emma Tomsich

Emma Tomsich is a student at Marquette University studying Corporate Communications, Marketing and Public Relations. She has a passion for writing, and hopes to one day own her own business. In her free time, Emma likes to travel, shop, run and drink coffee.