Question
It seems that the issuers of credit cards tied to frequent flyer programs have been raising the bonuses to get new cardmembers. You can now get 15,000, 20,000 and even sometimes 25,000 bonus miles by signing up for such a credit card, sometimes even without an annual fee.
Like other flyertalk participants, I find such offers interesting -- especially when I need to "top off" a ff account to get to a desired reward level. But I really have no use for the additional credit cards. So I tend to cancel them pretty soon after getting them -- and almost always before the first anniversary rolls around and I'm hit with an annual fee.
My concern is this: am I harming my credit score by signing up for, and cancelling, these credit cards? And, if so, how harmful is it? I don't plan on borrowing any money in the near future, so does it really matter -- especially if I otherwise have excellent credit?
Thanks for any input.
Answer
It is possible that multiple credit inquiries can drop your score a slight amount. Your credit score is influenced by multiple factors. They do consider how much credit you have available and how much of that you are using. Also, the average age of your accounts. Therefore, opening and closing accounts may conceivably hurt your score since your average account age will drop. That being said, it may be only a small drop, if at all. YMMV and you may feel that the miles you get are well worth the small ding.
Answer
It is possible that multiple credit inquiries can drop your score a slight amount. Your credit score is influenced by multiple factors. They do consider how much credit you have available and how much of that you are using. Also, the average age of your accounts. Therefore, opening and closing accounts may conceivably hurt your score since your average account age will drop. That being said, it may be only a small drop, if at all. YMMV and you may feel that the miles you get are well worth the small ding.
There's also the issue of what your total line of credit for all your cards is -- in simple terms, at some point your score curves over and the larger your total credit line becomes the lower your likelyhood of being able to get additional credit from another company.
Bob H
Answer
There are a lot of discussions on this at http://www.creditboards.com - some people monitor their credit scores daily and they know exactly what affects them. Good place to go if you want exhaustive discussions on it. The short answer, as earlier posters said, is, "it depends". It can increase your score by decreasing your utilization ratio (outstanding balance/total available credit). Unless you're hoping to buy a house soon and/or have other credit issues, one more card generally isn't a problem.
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The consensus seems to be that each hard inquiry decreases your credit score by 5-7 points. I have not found in general that having a large credit line at one place influences whether another bank will give you a card. In fact, it seems to be the case that the bigger your credit line at one bank, the bigger your credit line at a new bank (they'll often match your largest existing credit line for competitive reasons).
One interesting tool to see the effect of changes is a FICO score simulator at Bankrate:
http://www.bankrate.com/brm/fico/calc.asp
You can see they don't even really care about total credit available so it seems like that's a minor factor in general.
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Do extra credit cards harm your credit rating?
Not really - I applied for several credit cards and still have a very good credit rating.
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I agree with uSAFAN. I have opened quite a few credit cards the past two years for various offers then closed them shortly thereafter. There is a slight drop in the credit score but if you are starting out with a good score to begin with, it isn't a big factor at all.
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I agree with uSAFAN. I have opened quite a few credit cards the past two years for various offers then closed them shortly thereafter. There is a slight drop in the credit score but if you are starting out with a good score to begin with, it isn't a big factor at all.
Unless your credit score impacts your automobile insurance rates etc.
Bob H.
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I actually received a letter from my insurance company last month saying my rate was adversely affected by my credit report. But the new rate was maybe $10/year more than it was last year - 2% or so and who knows how much of that would have been for a normal premium increase. That didn't bother me and it allowed me one more free access to my credit report. But true, it could possibly have a larger impact on your insurance rates.
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This doesn't really have much to do with the "latest frequent flyer program buzz" so I'll move it to the "Other CC programs" forum.
Regards,
Flipside
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Your credit score should not be adversely affected if you apply for only a few per year. But if you are applying for several per month, then it can cause a drop in your credit score as a result of the number of inquiries and the composition of your credit limits. You'll have to look at your report to gauge how badly this will affect your score. If you have a solid credit file for a very long time with perfect payment history, several shouldn't hurt a bit. However, if you have moderate to poor credit with late payments and defaults, your credit score will probably be more sensitive to additional inquiries.
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Generally no it doesnt seem to harm your score too much but if you are opening and closing cards at least once per month then it can have an adverse affect on your credit score.
-UFFA
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Unless your credit score impacts your automobile insurance rates etc.
Bob H.
How can it impact your automobile insurance rates etc.
.......when the credit score doesn't change???
Please explain.
Answer
How can it impact your automobile insurance rates etc.
.......when the credit score doesn't change???
Please explain.
It has been reported for a while that some states/companies use the credit report to determine the rates...
http://www.insurance.com/Article.aspx/My_Credit_Affects_My_Car_Insurance_Rate/artid/32
Answer
It has been reported for a while that some states/companies use the credit report to determine the rates...
http://www.insurance.com/Article.aspx/My_Credit_Affects_My_Car_Insurance_Rate/artid/32
Yes, I know: Poor credit scores can result in high insurance rates.
My argument is: The credit score does not change (with "extra credit cards").... resulting in NO CHANGES FOR INSURANCE RATES.
The topic is (still): "Do extra credit cards harm your credit rating?"
And my answer is (again) NO!
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thanks for all the info
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There are some oddities that haven't been mentioned so far. The first is that when you close a CC account the issuer will report it as closed but may continue to report it as "in good standing" monthly for years on. I have two of these in my credit report. Most of the closed accounts will report as "not active".
The other anecdotal oddity is that if you were to, say apply to the UA Visa with habitual frequency you would notice that they don't pull a credit report every time if the last one they pulled had not gone stale. Thus your inquiries wouldn't go up at the rate you would expect them to. Not to mention the fact that similar inquiries get lumped together as a single inquiry as in the case of shopping for and verify you qualify for a home or auto loan. Credit cards must follow this case too.
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In my experience, chasing too many bonuses can definitely impact your FICO score. Two years ago, my score was lower than I expected since I had about 17 credit cards (4 open, the rest closed) listed on my myfico.com credit report. I stopped chasing bonuses, and my score is now 30-40 points higher (increase from 70th percentile to 95th percentile), even though nothing else about my creditworthiness has changed.
...
One trick I've used - switching to a new card with the same company. I switched from Hilton Optima to Starwood; did not show up as new credit. Ditto switching from Citibank AA to Citibank 5% cash back rewards card.
Answer
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One trick I've used - switching to a new card with the same company. I switched from Hilton Optima to Starwood; did not show up as new credit. Ditto switching from Citibank AA to Citibank 5% cash back rewards card.
can you still get the sign-up bonuses that way?
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can you still get the sign-up bonuses that way?
It doesn't work always. I noticed that you don't get sign up bonus with Chase card and AmEx has been mixed. When I tried to switch AA MC to 5% rebate card, I was told that it was for new applicants only.
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In my experience, chasing too many bonuses can definitely impact your FICO score. Two years ago, my score was lower than I expected since I had about 17 credit cards (4 open, the rest closed) listed on my myfico.com credit report. I stopped chasing bonuses, and my score is now 30-40 points higher (increase from 70th percentile to 95th percentile), even though nothing else about my creditworthiness has changed.
...
One trick I've used - switching to a new card with the same company. I switched from Hilton Optima to Starwood; did not show up as new credit. Ditto switching from Citibank AA to Citibank 5% cash back rewards card.
In the 3 years I have opened and closed AAdvantage card at least once every 9 months, ditto for the various reward cards from various outfits.
When I went to open a new bank account recently, the overdraft protection is in the form of a credit card and automatically comes with the account - naturally the rep pulled up my credit report - She noticed there are lots of credit cards listed, but many of them are closed by customer requests. According to her my FICO is 790+. She would not give me a copy of the credit report but tells me the FICO is on the high side. So appearantly the open and close of cards have very little impact on the FICO. The important thing is, I have not had any late payments except once and that was due to an error made by Citi, who told me the wrong balance to pay when I was travelling on the road and there was one small charge got posted at midnight of the statement close date and became unpaid as it was not included in the figure given by the rep. A call to the supervisor took care of that and that was a few years back. Other than that, I paid in full on every billing cycle, usually a week early.
Judging from the solicitation of cards I received each week, I gather my FICO should be fine.
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Judging from the solicitation of cards I received each week, I gather my FICO should be fine.
I agree with everything else in your post but I do not think that a high number of credit card solicitations necessarily correlates to only high FICO scores. Remember, people with high FICO scores (no late pmts, often no balance) are not the credit card companies' best customers...they want customers who pay closer to minimum payments & maybe an occasional late fee. So they target those with less than stellar FICO scores as well. (Not to be confused with deadbeat or bankrupt customers.)