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-Columbia, University Outreach and Extension

Cynthia E. Crawford, Ph.D., Consumer & Family Economics Specialist, University of Missouri-Columbia, University Outreach & Extension

Last update: Tuesday, July 05, 2005