Credit Cards For Bad Credit - Can Too Many Hurt Your Score?

When you've suffered financial problems for a long period of time

, it can be a breath of fresh air when you finally succeed in getting your first credit cards for bad credit. The freedom and privileges associated with having credit can easily suck you into the trap of applying for many more secured cards. After all, isn't having more credit better? Not necessarily. Too much borrowing power in the past may have contributed to your past financial problems. Also opening a lot of new cards too close together can hurt your score.

It Damages Your Borrowing Ability

Having too many open secured cards can also be a cause of concern for potential lenders. With the potential to get into debt beyond your means, a lender will most likely turn down your application. Showing too many inquiries on your report from creditors who've turned you down makes you look desperate, making future credit even harder.

How Many Is Too Many?

You're better off having two secured card, one for regular use, and one for a backup. If you make business purchases, you can have a third card just for this purpose. For the best impact on your score, you should have a healthy mix of one or two bank card, a gasoline card, and one department store card. Creditors want to see you responsibly handle different accounts at once. Just be sure to spread your charges among your cards and keep the balances at or below 30-35% of your card's limit.

Eliminate Unnecessary Cards

So what should you do if you have too may credit cards for bad credit? If its been a while, review the disclosure of terms and conditions of all your cards. Keep the two cards with the best APR and lowest fee schedule.

Next, you'll contact the remaining card accounts and close them. Be sure to tell the card company to report it to the reporting agencies as "closed by customer request". If you don't do this, it'll look like the card company closed it on you because you were a poor credit risk. This could have a major impact on your score. Once you voluntarily close the account, your card privileges will be canceled and you'll continue to receive monthly statements until your balance is paid off.

Trouble Deciding?

If you're having trouble deciding which credit cards for bad credit to close, close accounts you've already defaulted on or ones with large outstanding balances. Closing accounts with low balances could potentially hurt your FICO score.

In today's tough economy, banks are initiating the closure of customer accounts to protect their financial interests. And this policy applies not only to customers with high balances, it also applies to unused accounts. If you think your financial situation may turn for the worse, you're better of initiating the closure of unnecessary or delinquent secured cards before your creditors do.

by: Bobby Tan

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