Article by Guest Blogger: Taylor Lucas
One of the main misconceptions regarding credit card churning is that it is detrimental to your credit score. In reality, that couldn’t be further from the truth.
Many people are wary that a large number of applications will reduce your score. There is a possibility that if you have many applications in a short period of time, your score might drop but this is only temporary. By being responsible with credit card spending, such as paying in full every month and not being late on payments, having a large number of open credit lines will most likely increase your score over time.
I currently have 16 open credit card lines in addition to both student and car loans. By having this much credit I increase my score due to the following factors which comprise your credit score. I have included the impact of each factor on your score:
- Credit Card Utilization (High): This is a factor of your current balances divided by total available credit. By having a large amount of credit available and paying in full every month, I maintain a low utilization factor, generally below 5%.
- Payment History (High): The more cards you have and consequentially the more monthly statements you have, the more you can show banks that you are a low-risk borrower.
- Total Accounts (Low): By having a large amount of lines over time, you prove that you are a responsible borrower.
The one area where you might see a drop with a large amount of open lines is Age of Credit History which is a medium impact on your credit score. However, as long as you continue to open new cards and maintain old lines, this becomes less significant over time. This is why I always recommend keeping fee-free cards open as long as possible to increase this factor!
Below is a FICO score that was provided to me as a result of a recent denied credit card application. Some banks such as Chase are notorious for not allowing a large amount of active lines. I was denied for this card due to that and also that the business I was applying for was too new.
Even though I’ve been denied four credit cards over the last 12 months, you can still see that my score is a very respectable 812.
FICO scores of 750+ are considered excellent with scores of 800+ and a stable income generally qualifying for the lowest interest rates on home, car, and other loans!
All in all, having more credit cards over time, given you are responsible, will actually increase your credit score over time and potentially increase your chance for being approved for more cards and MORE MILES in the future!
- 0% intro APR on balance transfers for 18 months—then a variable purchase APR applies, currently 10.99% – 22.99%. A 3% fee applies to each transferred balance.
- 0% intro APR on purchases for 6 months. Then the variable purchase APR applies, currently 10.99% – 22.99%.
- Over 5,000 cardmembers rated 4.8 out of 5 stars* and now Discover “Ranked Highest in Customer Satisfaction with Credit Card Companies in a Tie” by J.D. Power*.
- 5% cash back for online shopping and department store purchases on up to $1,500 – Oct. through Dec. 2014 when you sign up*. 1% cash back on all other purchases.
- Free FICO® Credit Score online and on monthly statements*.
- No annual fee, no late fee for your first late payment – APR won’t go up for paying late, no overlimit fee and no foreign transaction fee*.
- Each Discover purchase is monitored. If it’s unusual, you’re alerted by e-mail, phone or text-and never responsible for unauthorized Discover card purchases.
- *+See rates, rewards, free FICO® Credit Score terms and other info by clicking “Apply.”