Does applying for credit cards regularly hurt your credit score?

credit cards

Today, a coworker and I were talking about how I recently applied for the Chase Fairmont card and Chase Sapphire Reserve card and he instantly responds with “Wow you must really want to ruin your credit score”. This is a very common misconception, that applying for credit cards, regularly, hurts your credit score. While yes your credit score may get dinged a point or two because of a new application, credit card churning in the long term does not do any damage to your credit score and may actually in fact help it.

Credit card churning and how it affects your credit score

Your credit card is made up of 5 different parts which are as follows:

  • 35% Payment History
  • 30% Utilization
  • 15% Length of credit
  • 10% Types of Credit
  • 10% New Accounts

The only part of your credit score affected by credit card churning is the new accounts portion. Having many credit cards without other forms of credit such as car loans, mortgage, etc. can affect the second to last bullet but only by a couple or few points. The most important thing is to focus on the first four bullets. If you focus on the first four bullets you’ll be able to obtain 90% of your credit score which scores you an excellent credit score (750 or higher). There is no higher credit score than excellent and with an excellent credit score you will qualify for the best credit cards and best loan rates. Below are my tips to ace each of the first four bullets:

  • Payment History- Pay on time and pay in full. If you’re forgetful sign up for automatic payments. Don’t carry as balance as the interest you will pay will easily exceed the points value you gained.
  • Utilization- Always keep between 1 to 9 percent utilization on all individual cards and your overall credit line. Your utilization is calculated by money on your card/your credit line. Your credit utilization is reported when your statement cuts and you can use this to your advantage. Use as much credit line as you want all month but a few days before your statement cuts, pay your credit card off to stay within 1-9%. 0% utilization is actually just as bad as using too much.
  • Length of Credit- Lenders want to see that you have a history of paying on time and not defaulting on your accounts. Keep a few no annual fee cards around and charge a few purchases on each every month. This will go a long way to prove yourself to lenders.
  • Types of Credit- I myself only have credit cards currently. I don’t have a car loan, student loans, or a mortgage. My score is likely dinged a couple of points because of this. Lenders want to see responsibility with all types of accounts. Finance a car for 0% APR to help your score out. That way it will help your credit score out and you don’t have to pay interest. If you don’t want to take out a loan you don’t have to. I don’t have any loans right now and I’m doing just fine with my credit score.

A key-note in the credit card game is not applying for cards too often and try to apply only every 3 months. Applying for more will scare the lenders as they think you might be having money issues. The 3 month rule has treated me pretty well but I have also gone longer and shorter than 3 months.

So in all it’s not hard to maintain a good credit score and enjoy credit card points. Don’t let anyone scare you. Just be smart, take care of your credit and apply for cards only so often.

Comment below with your thoughts or suggestions.

-Points Tutor