Finance Quick Answers
Do the number of credit cards I have affect my credit rating or my ability to get a loan?
Not long ago, creditors sized up a prospective loan
applicant by applying the four "C’s". They looked for
collateral, judged the applicant’s character, weighed
the borrower’s creditworthiness, and determined the
applicant’s capacity to repay. Recently, that sensible
precaution has given way to the "two C’s" - cutthroat
competition, says Consumer Reports.
Today, few credit card issuers get alarmed until they
see a dozen cards on your record. Looser lending
standards are found everywhere. Car dealers who once
gave you 24 to 36 months to repay now stretch payments
out for 60 to 72 months and cash down-payments are
disappearing. Home buyers now often need less than 5%
down.
It is important to remember, however, that just
because the number of credit cards you have may not stop
you from obtaining a loan, you need to be able to handle
the amount of debt you carry. Determine your own
debt-to-income ratio with proven yardsticks for the type
of purchase you want to finance. Coming up with a
substantial down payment for buying a home or car is
still a worthy goal.
(For information on how to determine your credit capacity, look here.)
Source: Set your own credit standards. (1999, July). Consumer Reports, 14.
Written by:
Sandra McKinnon, Consumer & Family Economics Specialist,
University of Missouri Extension
Cynthia E. Crawford, Ph.D., Consumer & Family Economics Specialist, University of Missouri Extension
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Last update: Saturday, July 26, 2008
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