The difference between loans that are open and loans that are open with balances is pretty obvious. You have a loan with or without a balance. The credit bureaus scoring modules look at number of open loans with no real consequence unless is too many or too few. Too many is about 20 open and too few is none. However, there is also a problem with having too many loans with balances and that number seems to be around 8. We see credit reports drop in scores and have reason codes that pertain to having too many accounts with balances right around that number.

The secret is to keep just enough loans with balances in a number to do the most good and stay away from having too many or too few.

I saw a well dressed lady the other day at the check out and opened a binder with pages and pages of credit cards instant approval experian for her to choose from. I was astounded at the number of credit cards that she had and wondered just what her credit score could be. She couldn’t have that many cards unless she had a pretty good score, so she would have to pay them off each month to keep from losing her credit and losing the opportunity to get more cards. But I have to wonder, why have so many cards and complicate your life with all those bills and trying to decide which card to use and the threat of losing all those cards is pretty scary. The solution would be to have 2 or 3 good cards with limits 2 times higher than you would ever need. I suggest between $40,000 and $50,000. But, remember to never go over the 45% of that limit so that your debt to credit ratio remains as low as possible, which keeps your credit scores high. (See secret # 17-21)

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