Too Many Accounts With Balances (2023)

If you see the phrase “too many accounts with balances” as a derogatory mark on your credit, this means that you have outstanding debt from an excessive amount of creditors.

This often manifests in the form of credit cards on which you owe money, which can potentially lower your credit score.

Creditors are typically concerned about missed payments and other harm that could result from debt spread across too many providers.

To fix this problem, consolidate your debt or pay off some accounts. After that, avoid keeping a balance on more than one account by paying off purchases immediately.

What does “too many accounts with balances” mean?

Revolving credit, such as credit cards and personal lines of credit, can help with emergency expenses and provide valuable benefits. But it’s also an area ripe for abuse. 

As a result, credit card utilization is crucial to your credit score, comprising about one-third of the calculation.

According to FICO Reason Code 6, carrying a balance on multiple revolving credit accounts will lower your credit score.

Creditors view this as a higher-risk situation due to the increased possibility of:

  • Missing payments and getting hit with late fees
  • Failing to track your usage and exceeding available credit
  • Rising interest rates might make it more challenging to pay off debt

These same concerns apply if you use more than 30% of a single account.

Overall, unsecured credit cards and personal lines of credit usually have high interest rates, making them an expensive way to borrow money.

Creditors don’t want to see any significant outstanding debt on revolving accounts as it shows a lack of financial sense.

What is the ideal number of accounts to hold a balance on?

Since revolving credit debt is unfavorable, you might aim for zero credit card balances. Unfortunately, this can also hurt your score. Creditors want to see that you can be trusted with this type of credit and use it properly.

Therefore, you want to find a sweet spot by having a balance on at least one account but not too many. To get the highest possible credit score, many people adhere to the all-zero-except-one (AZEO) method.

The AZEO strategy focuses on maintaining a zero balance on all credit cards except one. You get credit card rewards and benefits without the potential credit score damage.

You can still use more than one credit card to obtain discounts or other benefits.

The trick is to pay them off before the statement period ends. That way, creditors will report a zero balance on the account to the credit bureaus.

For example, imagine you want to use a Home Depot credit card to get discounts when shopping there, but you don’t want to use it as the one card with a balance.

Swipe your Home Depot card at the checkout to get the discount. Then immediately head to the customer service desk or online portal to pay it off. You get the benefits without reporting a balance. It’s the best of both worlds.

What if you have too many accounts with outstanding balances for student loans

If you already have or are considering student loans, you might be concerned about their influence on your credit score.

Since they increase your debt-to-income ratio, they can negatively impact your credit score and decrease your odds of future credit approval.

However, if you want to resolve a derogatory mark about excessive accounts with outstanding debt, don’t focus on student loans.

They are installment loans that you pay back over a set period, while the issue of concern is primarily related to revolving credit.

Does having a lot of accounts hurt your credit?

It might seem counterintuitive, but having many accounts does not hurt your credit.

Having a lot of open accounts in good standing shows you are trustworthy.

The age of your lines of credit also matters. Closing accounts could reduce your credit history and remove evidence of successfully maintaining long-term accounts.

Instead, sporadically use them for small expenses and pay off the entire balance right away.

Don’t abandon open accounts either. This can result in them becoming flagged inactive, which creditors don’t like because you should only open accounts you need.

Strategies to avoid owing money on too many accounts

It’s not always easy to dig yourself out of a hole filled with credit card debt. But you can take steps to improve your situation and credit score, such as:

  1. Don’t make the situation worse: Stop using revolving debt if you can’t afford to immediately pay it off. Limited emergency use can be justified, but repetitive usage of revolving debt shows you don’t live within your means.
  2. Reduce revolving debt: Pay off your credit card debt as quickly as you can. But keep a small balance on one account (AZEO).
  3. Consider consolidation: If struggles persist, a secured home equity loan or even an unsecured personal loan can transform your high-interest credit card balances into a single account with better rates. Your score might drop in the short term due to the hard credit check required for the loan approval. But it’s better than continuing with substantial credit card debt.

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