Will Opening Multiple Credit Cards Hurt Your Credit Score?

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The Easiest, Quickest, and Cheapest method to collecting millions of miles/points is to simply apply for credit cards! This is by far the most lucrative method available today, and there really isn’t anything else that comes close. For example, in the past five years, I’ve opened/closed at least 50 credit cards, and accumulated over 3 million miles/points. Yes, that’s correct, it’s possible to accumulate a balance in the Millions!

But if it’s so easy then why isn’t everyone doing it?

The simple answer is, Fear. We all fear what we don’t know, and conventional wisdom is that applying for too many credit cards is bad, and it will damage your credit score.

But do you really understand how your credit score is calculated?

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I. Your Payment History

Your payment history accounts for a whopping 35% of your total credit score. Therefore, as long as you pay all your bills on time each month, your score will continue to rise. If you have late payments, missed payments, or in collection, your score will go down.

II. How Much You Owe

30% of your credit score is based on how much you owe, or your debt-to-credit ratio.

For example, suppose you have only one credit card with a credit limit of $5,000. If you carry a balance of $2,500, then your debt-to-credit ratio would be 50% ($2,5000/$5,000). This ratio would be considered really high, and your credit score would drop.

Now, let’s suppose you have two credit cards and each with a credit limit of $5,000. If you carry the same balance of $2,500, then your debt-to-credit ratio would now be 25% ($2,500/$10,000).

As you can see, by opening more credit cards, your total available credit goes up, and your debt-to-credit ratio will go down.

III. Length of Credit History

The length of your credit history will account for 15% of your credit score. Therefore, the longer your credit card accounts are opened, then the higher your score will become. Never cancel credit cards which have been opened for 10+ years. If you cancel these credit cards, then your credit score will drop big time.

IV. New Credit

Next, 10% of your credit score is based on new credit. Every time you apply for a new credit card, you will have a hard pull on your credit report. If you have too many hard pulls in a short amount of time, then these multiple “inquiries” will appear on your credit report. Multiple inquiries is interpreted as a sign of high risk, and will cause your credit score to drop.

V. Credit Mix

Finally, the last 10% is based on the different types of accounts you have. For example, credit cards, mortgage loans, and retail accounts. Overall, the credit mix won’t be a key factor in determining your credit score. It’s only really important if your credit report didn’t have any of the other components to base a score upon.

But how does this affect my overall credit score?

Every time you apply for a new credit card, your credit score will drop 2-7 points in the short term. For example, if you were to apply for a different credit card each day, for four days straight, then your credit score would take a big hit! Therefore, in order to “game” the system, you simply apply for multiple credit cards on the same day. The end result is that you will only have one hard pull instead of racking up four hard pulls!

On the flip side, since you opened multiple new credit cards, your total available credit will increase. Remember, if your total available credit increases, then your debt-to-credit ratio will decrease! The end result is your credit score will rise in the long term.

To sum it up, YES, your credit score will drop a few points in the short term, but after a few months, your credit score will rise higher! Why? Because your debt-to-credit ratio will decrease, and this component is 30% of your credit score!

Don’t Apply for Credit Cards If…

  1. Credit score is low: Obviously, if your credit score is low to begin with, then you will have a hard time being approved for new credit cards. The best thing to do is to raise your credit score before you can begin applying for multiple credit cards. Try to get your credit score to be 720 before trying to rack up miles/points.
  2. No credit history: If you are young, then your credit score won’t be very high since you don’t have any credit history. Therefore, you should apply for a no annual fee credit card to begin building a credit history.
  3. Carrying a balance: If you are carrying a balance, and paying interest, than any benefits from accumulating more miles/points is NOT worth it. Paying +20% in interest is not going to benefit you in the long run, trust me!
  4. Applying for a mortgage, auto loan, or refinancing: It’s usually not a good idea to apply for more credit cards if you are trying to secure a loan. The banks will count all liabilities against you, and opening up multiple credit cards is not going to help! Therefore, secure the loan first before racking up the miles/points.

My Personal Experience

When I first began the travel hacking game, my credit score was ~720, and now it’s 795 (with 7 mortgages)!

Back then I would always pay my bills on time, and I never carried a balance. I knew my credit score was pretty good, but it wasn’t helping me in any other meaningful way. Then, I discovered the magic of miles/points, and was able to leverage my high credit score! I didn’t have any trouble being approved for 5+ credit cards at a time. So if your score is >720, and you’re not applying for enough cards, then your credit score isn’t working for you with credit card sign-up bonuses.

Overall, the key to my credit score success is to keep my debt-to-credit low. This is how I can be approved for 50+ credit cards, and still have a high credit score of 795. In addition, I have a few credit cards with no annual fees that I’ve had since I was 18 years old, and they really help to balance out my average length of credit card accounts. Again, I will never cancel these credit cards.

But what about the credit cards with annual fees?

Typically, with most of my miles/points credit cards, I will cancel them after 11 months when the annual fee is due. Cancelling credit cards within 11 months will not affect your length of credit history. Why? Because it will have a small effect on the average length of all your credit card accounts. In addition, when I do cancel a credit card, I will make sure to transfer the credit limit to another credit card, which helps me to maintain my total available credit. Remember, the debt-to-credit ratio makes up 30% of your credit score!

In summary:

  • Pay your bills on time
  • Never carry a balance
  • Never cancel no fee credit cards
  • And apply for multiple credit cards on the same day!

It’s an easy formula to follow, and my credit score continues to Rise! Plus, I get to travel in 1st Class, and stay in 5 Star Hotels!

If you ask me, that’s a really good DEAL!

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Living Proof

Living Proof is an avid real estate investor with a strong case of Wanderlust. He enjoys talking about his crazy lifestyle of collecting frequent flyer miles and hotel points. Within the next year, he hopes to declare early FI and to travel the world!

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Welcome to the site | My Credit Score Is 795 Is That GoodAn “Around-The-World-Travel-Hacking” Extravaganza!CalebA Lavish European Honeymoon for ONLY $1,300!Kipp Recent comment authors
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Even Steven
Guest

I totally see the upsides in travel hacking and rewards. In my personal situation I do not subscribe to credit cards since I have student loan debt, etc. Regardless I’m not sure if 50 credit cards passes my common sense approach to personal finance.

CI
Guest

Thanks for the informative post! This is relevant for me as I’ve been working on raising my credit score the past year. I recently picked up a third rewards credit card with a $15,000 limit (kind of surprised it was so high) which boosted my score over 800. I plan to cancel one of the other cards that has a small limit, guess we’ll see how that goes. Sounds like it won’t hurt me too much.

I find 3 cards to be a bit unruly, can’t imagine having 50!

guest12
Guest
guest12

How do you transfer your credit limit to a different credit card when closing?!?

Thanks!

No Nonsense Landlord
Guest

I see a lot of credit reports. I saw one tenant, after being late only once, with a 585 credit score. She had ~20 accounts, all current but one. And a 90% credit utilization rate.

Pay bills, keep old credit cards, keep a low overall balance. It’s simple and makes everything in life easier and cheaper.

JP
Guest
JP

Great article… been thinking about getting into travel hacking, but haven’t yet.
Couple questions:
1. When you transfer the credit limit, will they add it to the existing limit on the receiving card. For example, I’m canceling a card with a $10,000 limit, but have a card with no annual fee that has a $5,000 limit. When I transfer the limit, will my new limit on the no annual fee card be $10,000 or $15,000?
2. What do you do about the points/miles when you cancel the cards? Do you have to transfer the points to airline miles, or spend them before you cancel the card?
Thanks!

Kipp
Guest

I think that credit card rewards are a great way to boost cash flow to pay off debt quicker or travel. Now that I have no planned loans in the future, I can see a huge benefit to going on a tear with credit card sign-up bonuses, I mean if I can boost my income a couple thousand for buying what I would buy anyways… why not? That is more money to kill debt or invest.

CantWin
Guest
CantWin

My credit history goes back over 30 years.
My credit score gets reduced because I have no debt and too much
available credit that is not being used.
One suggestion on the credit report is to get a department store charge card.
That would give me even more available credit to not use and reduce my score.

Sundeep
Guest
Sundeep

I agree with Living Proof.

I essentially have just three cards, only one of which I use at all, paid off every month. Total credit available of about $50k, with only about $1k on the one card I use at any time. I barely, if ever, even use the other two cards (all no annual fees) and my credit score is 820.

Need to seriously take advantage of the score and get into the airline miles/bluebird/gift card game.

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[…] and most lucrative way to rack up lots of miles/points is to apply for Credit Cards. If you have good credit (+720), then it’s time to leverage your good credit score! Anything above 720 won’t […]

Caleb
Guest

This is great information for individuals who are new to applying for and handling credit cards. Balances and debt can become overwhelming if cards are mishandled and used irresponsibly. Always have a plan with a credit card. Know what you are going to use it for and how you are going to consistently pay it off. This can help keep the balance low and not get hit by major interest charges.

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[…] The easiest and quickest way to rack up miles is to simply open credit cards. […]

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[…] Will Opening Multiple Credit Cards … – I knew my credit score was pretty good, … and still have a high credit score of 795. In addition, I have a few credit cards with no annual fees that I … […]

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