How I keep my credit score high when opening and closing new cards

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  • In 2011, author Eric Rosenberg discovered the world of travel hacking and started opening credit cards to get signup or welcome bonuses in the form of points.
  • At first he was a little hesitant to open new cards, thinking they might hurt his credit – but they did the exact opposite.
  • The trick to keeping your credit rating high when opening and closing credit cards, carefully monitored his cards and made sure he never had an outstanding balance.

I discovered the concept of travel hacking thanks to Chris Guillebeau, author of “The Art of Non-Compliance” and many other great resources. This led me to one of his many projects, the Travel hacking cartel. I joined him in June 2011 and stayed there for a few months.

But what I learned there got me started on the path to the Dozen Credit Card Club.

I would later learn that Chris is part of a larger community of “travel hackers” who look to credit card rewards and skillful bookings to get maximum travel on minimum budget. It seemed like an amazing opportunity and something that I really wanted to try.

Read more: The best credit card rewards, bonuses & perks of 2019

I was a little baffled, however, when I first learned that the best way to get lots of points fast was with a new credit card. sign up bonus. Wouldn’t getting new credit cards affect my valuable credit score? I learned along the way, yes and no. But in the long run, opening all those credit cards made my score soar!

And along the way, I’ve accumulated countless reward miles and points that have taken me and my family to places like England, France, Holland, Israel, Spain. , Portugal, Canada and throughout the United States. While traveling with miles and points isn’t free, it allows you to go almost anywhere for pennies on a dollar with proper planning.

One system helps me manage all my cards responsibly

With a little hesitation, I took out my first card just for the purpose of earning miles. My 100,000 points British Airways Visa Signature Card A sign up bonus after meeting minimum spending requirements was all I needed to get hooked on the travel hacking hobby. This bonus covered a trip to London, Paris and Amsterdam with lots of miles, now called British Airways Avios, remaining.

Finally, I added the Chase Sapphire Preferred Card, then another card, then another. All of a sudden I was on my way to half a dozen cards. At this point, I realized I needed a system.

While there are many ways to do this, I keep all of my non-daily cards together in a safe place and monitor all of my balances, fees, and payments using a combination of tools. Free apps mint and Silver Clarity both work well for this purpose.

Read more: 7 reasons to open the Chase Sapphire Preferred, even if the card doesn’t offer as many flashy perks as the Sapphire Reserve

As long as you pay off your cards in full each month before the due date, you will never pay interest. I put a small subscription charge every month on a few old accounts with automatic payments so I don’t have to think about it. For the cards that I just use with specific airlines Where hotels and daily use cards, I pay them manually but check balances at least once a week within seconds using the apps above.

If a card has an annual fee and I don’t see myself getting more value from the card than the cost, I try to downgrade it to a no-cost version. If that’s not possible, I go ahead and close it. For cards with no annual fee or with good recurring value, I want to keep them open as long as possible.

I have to be careful how many cards I open and when

When you apply for a new credit card, a request appears on your credit report and reduces your score by a few points for up to two years. Opening a new credit account reduces the average age of your accounts, which further lowers your score. New, short-term credit is bad for your credit score. there is no doubt.

Additionally, if you are considering getting a new mortgage or other large loan, lenders may view a series of new credit accounts as risky behavior. Why would someone open a bunch of credit cards at once if they’re not about to go into debt? While you Be aware that you plan to pay off the cards in full each month, lenders cannot be sure of the risk.

Read more: The best way to build your credit is the same strategy people use to build wealth

But over time, adding new credit accounts improves your credit mix. More accounts with a perfect on-time payment history further increase your score. As accounts age, your average credit age also increases, and if you keep your spending stable, your credit utilization rate decreases. In my experience, the temporary effects of opening new credit cards wear off after about six months and turn positive. But that only works if you keep balances close to zero and always pay on time.

The biggest risk in opening and closing many credit cards is to make a mistake. If you aren’t keeping a close eye on your accounts, it’s easy to make a late payment or spend too much money. It can hurt your credit score for years, so always be careful.

Read more: Here’s exactly what it takes to have a great credit score

Also, keep in mind that credit card companies don’t really want you to open and close accounts quickly, so space things out and take it step by step.

For example, Chase is known among credit card travel hackers for his 5/24 rule. This rule states that, in most cases, you cannot open a new Chase credit card if you have opened five or more in the past 24 months with a card issuer. If you close an account too quickly, AmEx is known to collect bonuses. But if you play by the rules, you should be in good shape.

I always look at the long term costs

The real reason I have so many credit cards is to travel as much as possible for the lowest possible cost. But if the cost of having these credit cards becomes more than my travel savings, it’s not worth it. That’s why I always look at my balances and plan my next moves.

Read more: It’s the only rewards credit card most people will ever need to open

In the worst-case scenario, a serious misstep could hurt your credit rating and prevent you from buying a home with a mortgage. It could also result in higher interest rates, which could cost tens or hundreds of thousands of dollars over the life of a home loan. Your credit is serious business, so you should never forget about its long-term consequences.

The best thing you can do for your credit in most cases is to keep your balances low and avoid tinkering. But if the fear of damage to your credit is all that is holding you back from a great new card, you could be needlessly falling victim to a credit score myth.

When working to earn credit card rewards, it’s important to exercise financial discipline, such as paying off your balances in full each month, making your payments on time, and spending no more than you can afford. allow to repay. Essentially, treat your credit card like a debit card.

Find out more about the British Airways Visa Signature card from Business Insider partner The Points Guy »

Learn more about the Chase Sapphire Preferred Card from Business Insider Partner The Points Guy »

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