Is There a Such Thing as “Too Much Credit?”
The key lies in credit utilization!
Those in the know about credit (as you probably are, since you’re reading our articles!) will remember that credit utilization is one of the biggest factors that influence your credit score.
To be specific, credit utilization makes up about 30% of your FICO score and about 20% of your VantageScore, with available credit comprising an additional 3% of your VantageScore.
Knowing this, we can conclude that the more available credit you have to your name, all other factors being equal, the better your credit score will be.
Why? Because the more available credit you have, the lower your credit utilization will be, which is ideal for your score.
However, this naturally leads to the question, “Can you have too much credit?”
It makes sense to wonder if there is a limit to which it is beneficial to have available credit. Is it possible that lenders could frown upon having too much available credit for fear that if you were to use all of that available credit, you could end up deep in debt and unable to pay back your loans?
In addition, there are a couple of other perspectives to consider regarding the question of how much credit is too much. For example, you might also wonder how much debt is too much with respect to your available credit (i.e. how much credit utilization is too much) and if having too many credit cards can hurt your score.
So, let’s try to answer the question of whether having too much credit could hurt your score by addressing three different angles of the issue: having too much available credit, having too much debt, and having too many credit accounts. We’ll also look at the amount of credit the average consumer has so you can see where you stand in relation to the national average.
How Much Credit Does the Average Person Have?
To provide some context before defining what may constitute “too much credit,” first, let’s find out how much credit that the average consumer tends to have.
What Is the Average Amount of Available Credit?
According to a recent report by Experian on U.S consumer credit card debt, in the second quarter of 2019, the average credit limit of consumers who have credit cards was $22,751.
The same report found that the average American has around four credit cards, so this $22,751 credit limit is likely spread across four cards for the average consumer.
Credit limits show trends based on age and location. Baby boomers, or those who are currently between the age of 55 to 73, have the highest average total credit limit compared to other generations, at $39,919. In contrast, millennials have an average total credit limit of $20,647, while Generation Z (the youngest generation) has an average total credit.
The states with the highest amount of available credit include New Jersey ($37,845), Connecticut ($36,272), and Massachusetts ($34,685). The lowest average total credit limits per consumer are found in Mississippi ($21,676), Arkansas ($24,570), and West Virginia ($24,684).
What Is the Average Credit Limit of a Credit Card?
The above figure for average total credit limit refers to the total credit limit for all credit cards owned by a consumer added together, not the average credit limit of each individual credit card. So if the average consumer has four credit cards, the average credit limit per card would come out to $5,687.75 ($22,751 / 4 = $5,687.75).
How Much Credit Card Debt Does the Average American Have?
According to Experian, in the second quarter of 2019, the average amount of credit card debt per consumer was $6,194.
Just like available credit, the amount of consumer credit card debt varies across regions. Alaska has the highest average credit card debt per consumer at $8,026, followed by New Jersey at $7,084 and Connecticut at $7,082. Iowa, Wisconsin, and Mississippi had the lowest average amount of credit card debt at $4,744, $4,908, and $5,134, respectively.
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