I'm loving the posts of rewards people are getting when signing up for credit cards. But I'm a little confused. My understanding is that every credit card application reduces your credit score and therefore increases your interest you will pay on future cards. Can you share your experiences? I'd like to get in on this gig. Do you notify Equifax when the card is closed and paid in full?
Credit card application and the affect on credit scores
April 10th, 2012 at 02:44 am
April 10th, 2012 at 03:15 am 1334024107
Closing cards will also temporarily lower your credit score since your overall available credit level decreases relative to how much debt you have. You don't need to notify any credit bureau if you close a credit card though.
If you would like to get the rewards, I would recommend finding a credit card without an annual fee and a good cash back program, use it like cash and pay your balance in full each month, and you should essentially be earning free money on your normal expenses. Your credit card interest rate won't apply if you pay by the due date on your statement which comes out each month.
Feel free to check out my blog if you have any other questions about credit cards.
April 10th, 2012 at 03:26 am 1334024761
No, you don't have to tell Equifax; they can tell when something was paid in full and closed.
I wouldn't have started working the credit card rewards if someone as smart and conservative with her money as MonkeyMama hadn't recommended it.
Between three people in my family, we have 12 closed cards and 5 open ones. Two of them we just got approved for. If it was going to hurt our score, it would have affected our most recent applications.
Maybe if you're going to do something big like apply for a mortgage in the same couple of months, don't play around with things that could cause fluctuations in your credit score. But I honestly can't see it affecting much.
(I don't actually pull my real credit scores, but I did check CreditKarma a couple times and the most one of our scores dropped was 10 points in a month. But like I said, hasn't affected our approvals.)
April 10th, 2012 at 02:02 pm 1334062958
April 10th, 2012 at 02:03 pm 1334062991
HOWEVER, I, too, took the plunge into the world of rewards credit cards last year, soley as yet another way for me to make some extra money as I continue looking for full-time work.
And so I can tell you from personal experience, as I know MM can, that taking on new cards doesn't hurt your credit as long as you don't take on 3 at a time, or, say, charge it up to near the maximum credit line.
for years, being debt-averse, I only had 2 credit cards, one with no rewards at all, the other with mediocre rewards.
I've gotten 4 or 5 new cards in the last 6 months or so and my credit score is unchanged. Yes, I check it via creditseasame or creditkarma prior to opening up a new card. I've done it systematically, scouting around for the best rewards program, then using that one card soley in the next few months to meet the target spending amount and then immediately moving on to the next card. I have only cancelled one of the new cards I got. And I want to note, I got $200 from a citi world dividend master card and called and asked a few months later if i could also get $200 from a citi dividend VISA card and they said yes, and I did.