Update: A credit card offer in this post may no longer be available, but check the Hot Deals for the latest offers!
Million Mile Secrets reader Kendra emails:
Should we only apply for cards once every 3 to 4 months and apply for several cards at a time? If so, how many or does it matter at all? Can we apply for a new card every week?
Why You Can’t Apply for New Cards Every Week
I wish I could apply for an unlimited number of credit cards each week! That would make getting Big Travel with Small Money much easier!
But unfortunately, while we look at credit cards as a way to earn award flights and hotel stays, the banks view credit cards as a business. And the banks do NOT want to lose money by extending credit to people who will not pay their bills.
So each bank determines how much credit to give you based on factors such as your income, history of repaying debts, and the number of new credit card accounts you’ve opened recently.
Too many accounts opened in a short time is a red flag!
Why Does It Matter?
It’s important to protect your credit score. Your credit score is worth much more than miles & points. That’s because having an excellent credit score will help you through many major financial moments in life such as, buying a home, buying a car, getting a student loan, and even turning on your utilities.
If Kendra has a poor credit score, she could get a higher interest rate on major loans or even be blacklisted. This could cost her tens of thousands of dollars over the course of a 30 year mortgage! So Kendra should NOT get into the miles & points game if she doesn’t pay her bills in full each month.
Fortunately, many folks who apply for lots of credit cards see their credit score increase! But you have to make sure you are spreading out your applications and paying your bills on time!
How Does Applying for Credit Cards Impact Your Credit Score?
Each time you apply for a credit card, the bank pulls your credit score. And when a bank makes a credit inquiry, your score can temporarily be lowered by 3 to 5 points, but this effect drops off after 3 to 6 months. Even though the inquiry stays on your report for 2 years.
Signing-up for new credit cards can also increase your credit score over time because it increases the amount of credit extended to you and therefore gives you a lower credit utilization rate (as long as your paying your bills in full each month!).
How Often & How Many Cards Should You Apply For?
Banks don’t like to see a lot of credit inquiries on your credit report because it means you could be less likely to pay back your debt.
So it’s key to apply for credit cards from different banks. That’s because many banks will allow only a limited number of open accounts and they typically pull your credit report from just 1 of the 3 credit bureaus.
There are 2 ways folks approach the timing of their applications:
1. Apply for a Few Cards Each Quarter
The effect of credit inquiries drops off after 3 to 6 months. So some people like to apply for 3 to 4 cards every 3 to 4 months.
They apply for 3 to 4 cards at the same time because some believe that banks won’t see the inquiries from other banks on the same day.
2. Wait for the Big Sign-Up Bonuses
Another way to time your applications is to apply for the increased sign-up bonuses when they are available. Or when you feel comfortable meeting the minimum spending. You could apply for 1 card now, and another one in ~1 or 2 months.
For example, there is currently a limited time increased sign-up bonus for 3 AMEX Delta Airlines cards. If you sign-up for 1 these cards and complete the minimum spending, you will get 15,000 to 20,000 more Delta Airlines miles than the usual bonus.
The Chase United Airlines Explorer card’s sign-up bonus has also increased to 50,000 United Airlines miles from 30,000 United Airlines miles.
However, Kendra is new to miles and points, so I recommend she start out slowly with 1 to 2 cards to see how her credit score is affected. She could apply for a no annual fee card like the Chase Freedom because she will never have to cancel it. This will help her build a long credit history, which accounts for 15% of your credit score.
It’s important to be careful when applying for lots of credit cards because you want to maintain good relationships with the banks and build a good credit history. Having an excellent credit score will help you obtain the best possible rate on a major loan in the future.
I recommend that folks who are new to miles and points start out slowly by only applying for 1 or 2 cards. This will give you time to see the impact on your personal credit score.
Thanks for your question, Kendra!