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Million Mile Secrets reader, Brittany, tweeted:
Can you do a post on maintaining a credit score of 750+ while applying for lots of cards? I can’t find a recent one.
Did you know applying for lots of credit cards can actually improve your credit score?
If you aren’t familiar with how your credit score works, credit cards can seem scary. Because the way you handle your credit cards can greatly impact your credit score.
But if you understand the factors of your credit score, you’ll see it’s less impacted by the number of cards you have. And has more to do with how you use them.
I’ll show you why applying for lots of credit cards is NOT always bad for your credit score. And how they can even enhance it!
Will Applying for Lots of Credit Cards Lower Your Credit Score?
Applying for credit cards will NOT ruin your credit score. But misusing the credit cards you open can.
According to the FICO website, your credit score is determined by 5 factors:
- Payment history
- Amounts owed
- Average length of credit history
- Types of credit
- New credit
When you apply for a new credit card, 2 of these areas will decrease your credit score. Your credit score’s average length will decrease, and your new credit will take a minor hit. So your credit score will dip by 3 to 5 points. But this is temporary!
You Are in Control of Your Credit Score
When you’re approved for a new card, the other more influential areas will increase your credit score!
1. Amounts Owed
Your amounts owed, which accounts for 30% of your score, will improve. That’s because you’ve opened a new credit line, and have more credit available to use. So the ratio of how much you have available to how much you owe will go down.
Note: The general rule is having a balance of over 30% of your available credit will decrease your score. So if your credit limit is $10,000, for example, don’t charge more than $3,000 to that card.
2. Payment History
After you have opened a credit card, you must pay your bill in full every month. If you miss a payment, your payment history will be negatively affected. This is a big deal because it accounts for 35% of your credit score!
As long as you are responsible with your finances (pay your bills on time, and don’t max out your card limits), you can open lots of cards, and your credit score will actually increase over time! With an increased credit score, you’ll get great benefits like lower interest rates and higher odds at being approved for other loans.
Million Mile Secrets team member Jasmin has 23 active credit cards. And her credit score is ~800.
Million Mile Secrets team member Meghan has 14 active credit cards and 4 mortgages. And her credit score is ~793.
Note: A history of applying for lots of credit cards will not prevent you from getting things like auto loans and mortgages. But I personally would not apply for lots of cards in the 2 years leading up to a mortgage, just to make sure you don’t look desperate for credit. A few cards is okay, but not 20!
Good Credit Is Good Enough!
Your credit score will benefit if you use your credit responsibly. And pay each bill in full and on time.
And having a good score is enough. You don’t need to strive for “perfect.” A score of ~780 is just as good as 800+ to open a new card.
So while you might not reach the elusive 850 credit score, just know if you’re well over 700, your credit is already good enough to get the best travel rewards cards.
You Should NOT Apply for Credit Cards If…
The miles & points hobby is not for everyone. And your credit score is not something to take lightly. I would not recommend applying for lots of miles & points credit cards if you:
- Carry a balance (miles & points credit cards have higher interest rates – the rewards you earn will not be worth the interest you pay!)
- Have trouble budgeting
- Can not meet minimum spending requirements
- Think you may have late payments
Note: While canceling a credit card can slightly decrease your credit score, annual fees can add up. Evaluate each card for a year, and cancel any cards you don’t feel are worth it.
If you downgrade your card to a no-annual-fee version, you’ll keep your available credit, and you won’t impact your average length of credit history! But in most cases, you give up earning a sign-up bonus when you downgrade.
Or, you can also apply for a new no-annual-fee card periodically to maintain your length of history (because you never have to cancel them!).
Confident You Can Handle Travel Rewards Cards? Start With These!
If you’re responsible enough to use miles & points credit cards, here are a few good cards to start with!
- Chase Sapphire Preferred – Earn 50,000 bonus points (a value of at least $625 when you redeem through the Chase Ultimate Rewards portal) after you spend $4,000 on purchases in the first 3 months from account opening. This is the top card I recommend for beginners!
- Chase Freedom – Earn $150 (15,000 Chase Ultimate Rewards points) after you spend $500 on purchases in your first 3 months from account opening
- Chase Southwest Rapid Rewards® Plus Credit Card – Earn 40,000 Southwest points after you spend $1,000 on purchases in the first 3 months of opening your account
Opening lots of credit cards does NOT ruin your credit score. The way you use your cards is what will determine your credit score.
Miles & points credit cards have higher interest rates. If you aren’t financially responsible, those interest rates will cancel out the rewards you earn with your credit cards. And can even put you deeper in debt!
You can keep your credit score in the “excellent” range (and even increase your score!) by paying each and every bill in full and on time.