Update: Due to this post's immense popularity, we've updated with data through June 2017.
The number one reason a reader is wary of signing up for multiple credit cards at once is the perceived impact to his or her credit score. Listen, I get the hesitation: since as early as I can remember, I was told that opening multiple credit cards would hurt my credit score. The thought seems safe and intuitive, and there wasn't a real need for me to challenge this assumption. Compounded with the incredible important of a credit score to future financial health, I understand your skepticism.
But I'm asking you to challenge this assumption - by reading the below and making your own judgement. For context, I have earned well over 3,000,000 million frequent flyer points - worth $60,000 at an approximated $0.02 per point - in the last three years, applying to dozens of credit cards per year. Meanwhile, my credit score continues to raise to new heights; at nearly 800 now.
Before we continue, I would highly recommend reading how to better understand your credit score and, at the conclusion of this piece, taking the step-by-step advice outlined on how to cancel a credit card without impacting your credit score.
My Credit Score History After 60+ Credit Card Applications
Below you will see two images outlining both the history and present state of my credit score. The first image is a graph I keep for my consulting practice, the goal of which is to generate higher return on everyday spending for small businesses. The ethos of this first chart is a fascinating discovery: after an initial drop in credit score (the yellow line), there is a steady climb until the number peaks well over the previous highs. Meanwhile, 60 credit cards are obtained, with 46 closed.
Let that sink in for a second. If the preconceived notion that multiple credit cards hurt a credit score were true, you would expect that yellow line to tank steadily over the course of the five years. And if you combined this notion with another age-old adage that closing credit cards is bad for your credit score, you'd believe the chart was false. Put more simply, the red bars and yellow line shouldn't grow together.
Now the second, more recent image, taken from the free credit score monitoring service, Credit Karma, in June 2017. As you can see below, despite applying to over a dozen cards per year since the start of 2012, my credit score has risen to nearly 790 across two of the three major credit bureaus. Anything over 740 is considered a very good score that will offer you the lowest available loan rates.
In case I wasn't clear, this hobby of credit card churning - or applying to many cards in short order - has positively impacted my credit score, helped me in securing a mortgage and unlocked tens of thousands of dollars in value per year. I am not here to brag – only to tell an extremely impactful story, which is this: if you follow the five rules I outline below, you can apply to as many credit cards as possible and not suffer long-term negative impact to your credit score or financial well being.
Rule #1: Keep your oldest credit lines
Let me be frank: I am lucky. My parents signed me up for an “emergency” credit card in high school, knowing that it would also help build credit over time. This is my most important card since it has the longest age, which is a huge portion of your credit score.
But I am also opportunistic. When I learned about the average age of your credit score being one of the main reasons banks deny applications, I read something else very important – an authorized user (meaning you have a card on someone else’s account) will inherit that account’s credit history, good or bad.
Once I learned of this I immediately had my parents add me to their oldest credit line and just like that I inherited their credit line (that was older than me!). This “new” old line has been another essential part of my score. And since you aren’t planning on using the card as an authorized user, just inheriting the account history, you can shred the credit card up upon receipt - to ease the mind of the account owner.
One more note on average age of the accounts: while applying for a large number of cards will inevitably lower your average age, the impact to your score will be largely stabilized after several cards.
For example, if you have two cards with an average age of 10 years, two new applications would decrease that immediately to five years (20 years divided by four cards, instead of two). After eight new applications, the average age is two years.
But do you see a trend? Each new application impacts your average age, but by a lesser degree. Looking at the first chart again, you’ll see that my big dip in credit score happened in early 2012 after my first four applications or so. After that other factors begin improving your score as the average age stabilizes.
Rule #2: Add New Cards, Add Available Credit
This is the key factor that many do not realize actually improves your score. With every new approved card, you will have another credit line to add to your total available credit. A higher amount of credit available does two things to improve your score.
The first is relatively simple: credit bureaus and banks place an emphasis on people that can handle more credit. This makes sense intuitively – if you have $40,000 available across several cards, but still spend the normal $2,000 a month, that shows a level of responsibility when it comes to handling credit, especially when compared to the person who maxes out their single $2,000 credit line each month.
Banks want responsible customers who can handle multiple accounts and won’t default on their payments. Which is why, as shown below, customers with 22+ accounts get a higher grade than customers with under 5 accounts.
The second positive impact has to do with debt utilization, or the percentage of your available credit that you utilize in the form of debt. Again, this is not a complicated idea once you wrap your head around it – and it is shown graphically below.
For example, let’s say person A spends $2,000 a month with $40,000 of credit available. That means he or she is utilizing 5% of his total available credit ($2,000 debt balance divided by the available $40,000). Person B is maxing out his or her balance, so that is 100% debt utilized. Which looks better to you? (Hint: It isn’t B).
Now what if you took that $2,000 balance and applied it to $80,000 available credit? $120,000? As you can see, the higher credit available reduces your debt utilized if you spend as you normally do. This is how from early 2012 to present day my score has risen application after application.
Rule #3: Transfer credit lines when Possible
Canceling a credit card can be a daunting task at first glance, as I'm sure all of my readers have heard that canceling cards is a bad thing. But with the above two points in mind, you will realize that closing an account will not have the effect many perceive, especially when you keep the available credit line by transferring before closing it.
While not every bank allows you to do this, it is worth asking the bank representative up front when going through my step-by-step process on how to cancel a credit card.
By keeping the credit line, you decrease the number of accounts (helping average age of your accounts) but keep the same amount of available credit (helping with your total credit and debt utilization). When done right, canceling a card is actually a good thing.
Rule #4: Spread your applications out
The one trap many of my readers fall into is thinking that as long as their score is above 700, they are good to apply. This is one of the reasons I outlined the top five mistakes to avoid when applying for a new credit card.
Number three on that list is “applying too often or always at the same bank” (which lead to this section’s title). In my experience, following two simple concepts can minimize hard inquiries (what a bank will use during an application – too many of these is a bad thing).
- The first concept is spreading out applications by bank. There is no secret formula to follow for each bank, but my experiences and others in the community can paint a picture that will at least increase your chances of approval. If you have never gotten the card before, I recommend waiting a few months in between applications.
This means, for example, if you have applied to a couple Chase cards recently, I would wait about three months before trying any others with the bank. Or, even better, wait six months between Chase cards and in between try applying for a different bank offer. Since banks utilize different credit bureaus, this has the added benefit of spreading out your hard inquiries, thus increasing your approval odds.
The second concept is spreading out applications by time. When you have had a particular credit card before, things get a more complicated. This is because some credit cards are able to be “churned” – meaning you can apply for and receive the bonus as many times as you want, with conditions.
The condition is you must follow each banks required time window. Chase, for example, requires two years to pass in order to successfully receive a bonus again. American Express is once per lifetime, depending on the product. Since these time windows are always changing, I recommend reading FlyerTalk regularly for the most up-to-date news.
Rule #5: Pay your balance in full, every time
The final recommendation is the most important and requires little explanation – all you need is time, effort and diligence. Having a history of on-time payments has the largest impact to a credit score. And even 99% made payments can drop your score – so make sure it is 100%.
Paying in full also keeps you from having to pay any interest, something that I never recommend doing in pursuit of free points and miles. I mean, they wouldn’t really be free then.
Let me repeat: don't get cute with this rule. Never miss a minimum payment and try to not carry any high balances from month-to-month.
The final word
And there you have it: an in-depth, personal account to dispel the notion that multiple credit cards will hurt your credit score. I hope you are persuaded, but if not feel free to send any questions my way before your next application.
By the way, if you want to leverage multiple credit cards into an endless stream of frequent flyer miles and hotel points, I recommend two things: find out your credit score on Credit Karma, then read my highly popular Getting Started Guide: 5 Steps To Use Credit Cards & Maximize Your Travels.