Can You Have More Than 1 Line of Credit?

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Multiple lines of credit is very common.
Multiple lines of credit is very common. (Image: credit cards image by Aleksandr Lobanov from Fotolia.com)

The typical American holds more than seven revolving lines of credit, according to MSN MoneyCentral. Having multiple lines of credit open could make life more convenient for you and save you money in the long term. On the other hand, managing several loans at once requires fiscal responsibility and a commitment to use that credit wisely.

Identification

You can have more than one line of credit at a time, and you probably will have several throughout your life, such as student loans, mortgage and credit cards. As long as you can service your debt payments, there is no theoretical limit to number of accounts you can have at one time.

Benefits

Having more than one line of credit usually helps your credit score. The FICO scoring model, a standard in the lending industry, gives a 10 percent weight to the variety of loans you own. Managing different types of credit, such as installment and revolving loans, gives a consumer more experience in borrowing money. Increasing your credit score lowers the interest rate on future applications for credit.

Multiple lines of credit can also provide safety. You might, for instance, have a separate account for online purchases to prevent a thief from compromising your main account. If you lose a credit card, a backup card means you won't have to pay with cash or check until you get a replacement. Also, merchants do not accept all types of cards, so mixing your card issuers gives you more payment options.

Disadvantages

Taking out too many installment loans increases your monthly payments and the chances that you cannot meet your obligations. The FICO model dings your score a little just for taking out a new loan, because needing a loan insinuates you cannot meet your bills with your income alone. Juggling too many loan payments at once also boosts the odds that you will forget to pay a bill, which hurts your FICO score.

Tip

Although acquiring a new loan could help your credit score immensely, Experian does not recommend taking out any line of credit unless you need it. Instead of a new loan, work to pay down the debt on your current line. Alternatively, you could use a new account to handle debt. If a new card offers zero percent to transfer your balance, for example, you could use this time to eliminate the balance interest free.

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