One of the most-asked questions about credit cards is how does it affect your credit score, and of course the implied followup, do you care?

I’ve signed up for scores of cards over many years and I still have an excellent credit score, it was nearly 800 FICO on the three major credit bureaus when I went to get my mortgage. In part because of signing up for more cards, rather than in spite of it.

Each time you request credit, and your credit is pulled as a result, your score usually dips a little bit but just on the credit bureau that was pulled. So if an Experian credit report was pulled, the inquiry only shows up at Experian. Requests for credit suggest you might need credit, and lots of requests for credit can be a signal of trouble. But this is a small part of your score.

The average age of your accounts count, even for a period of time your cancelled accounts, so lots of new accounts can shorten that average age.

But on the flip side, having more available and unused credit will help your score – because one important factor is your utilization percentage. We’re not talking how much of a balance you revolve or don’t pay off in a month, rather how much of your available credit you burn through in a month. So if you have $5000 in available credit, and you run up $2000 in charges, you’re using 40% of your total available. If you run up $2000 in charges and have $20,000 in available credit you are only using 10% of what’s available to you — look how responsible you are with credit!

Applying for more and more cards over time has certainly helped with my total available credit, and thus my credit score. So there’s pluses and minuses even to your credit score.

And in fact when I cancel cards, I often try to retain the credit. Chase generally lets you move your available credit from one card (the one you’re going to get rid of before a fee hits) onto another card (that you’re keeping). American Express has frequently offered the ability to move around your credit between cards as well.

I admit I don’t even bother checking my credit anymore before I sign up for cards. I’m not doing 10 at a time. I’m not balancing my inquiries across the credit bureaus, there aren’t enough offers that I either haven’t had or can get again in the near term that I have that luxury. So I’m just balancing my card applications across banks. I’ll try to apply for one card from each of the co-branded issuing banks at a time, subject to decent offers being available

The real hardcore folks will manage the inquiries on each credit bureau, there are forums over at Credit Boards where people list which bank runs credit through which bureau in each state. So if you have too many inquiries on one bureau you can apply only to banks that will pull your credit from another one.

I don’t really get rejected from cards, my credit is good, and I don’t have a major purchase like a house (or a refinance) on the horizon. So I don’t even monitor my credit score closely, I just do irregular housekeeping to make sure nothing is on my credit report that shouldn’t be by mistake.

Credit inquiries also don’t stay on your report more than a couple of years, they have a limited time in which they’ll even effect your score before aging off. For me, the only area where my score even matters much — given that I do have high scores, it would matter more than the sub-700 level for sure — is in the housing market. A score that forced up a mortgage rate wouldn’t be worth the benefit of card signup bonuses. So even in my case, where I was nowhere near that threshold, I took a breather from cards for the year (to some extent) and six months (much more so) leading up to my mortgage.

But a perfect credit score doesn’t really help you. If you have a 760 FICO you’ll qualify for the best mortgage rates. An 800 or higher score won’t get you better rates. So if your score is 800, you’re not applying for enough cards, your credit score isn’t working for you with card signup bonuses.

Now, credit card signup bonuses are available for the most part to folks with good credit scores, so if you don’t know whether that’s you then you may want to check before diving in.

I’m a fan of Credit Karma and Credit Sesame (the latter of which offers a very small referral bonus to me), though as I say I don’t do this religiously and don’t keep tabs on the best offers for credit monitoring.

This game, too, is only for folks who pay off their balances each month. Otherwise the most important thing is getting the lowest interest rate possible,

  1. oliver2002 said,

    Bad/typo url in the creditkarma link…

  2. Brian said,

    Thanks for the insightful post.

    What about business cards? I have cards under a DBA account, so my ‘business’ uses my SSN/tax ID. Does the account limits/credit used on these get taken into consideration when calculating personal credit scores? Also, any idea why they are generally approved for a higher credit limit?

  3. Gary said,

    @Brian business cards applied for with your SS# will pull your credit score but generally not report on your credit report

  4. Gary said,

    typo fixed :)

  5. Mario said,

    I was under the impression that utilization is based on your balances when the statements close, not the amount of purchases per month?

  6. Gary said,

    @Mario strictly speaking it’s the balance on the card on the date being reported which does not HAVE TO BE the date the statement closes. I was simplifying somewhat, not discussing paying down balances mid-cycle.

  7. Michael said,

    I’m less worried about the actual number and more worried about identity theft or mistakes on my credit report. For those who don’t know, you can get a free report (no FICO score, just a list of accounts) once per year from each of the three agencies. Spread them out throughout the year to maximize utility.

    The link is: https://www.annualcreditreport.com/cra/index

  8. chris said,

    One strange thing about credit score factors is concerning your utilization percentage which you mention. The lower the percentage, the better for your score. Unless, apparently, that percentage is zero. I checked on my credit karma score and was looking at my individual grades for various aspects involved in the credit score and I got ‘A”s on about every phase except for my utilization percentage. I never carry a balance on any of my dozen or so cards and it looks like if you have a utilization percentage of 1 to 10 percent or so you get an ‘A’ and it predictably goes down from there but what’s strange is my zero percent was deemed a ‘C’. I guess due to some “does not compute” factor. Still kind of strange. You’d think zero would be included in the lower percentage range. Go figure.

  9. Bender said,

    Gary, what about opening business cards with my business tax ID number? Do they base those approval decisions just on business taxes and does that impact the point-earnings capability of that account?

  10. Gary said,

    @Bender I opened an Ink Bold off a brand spanking new LLC and was giving $20k or $25k credit limit. Surprised me :) You can of course open such a card with each Tax ID you have and should get the bonus for each…

  11. Bender said,

    Do they consider your credit/income as basis for repayment? Also, does it weigh in your reports inquiries and score? I have an LLC but don’t file taxes under the business but would love to get tje ink bold soon. I have the SPG business card under my ss# rather than tax ID but am concerned about inquiries at this point. Any insight?

  12. Free First Class Next Month: Checking Your Credit Score | milevalue.com Free First Class Next Month: Checking Your Credit Score | Rationally Exploiting Frequent Flier Programs said,

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  15. Randy said,

    I just applied for a Chase Ink card. How long do I need to wait
    To apply for a Chase Saphire, or do I have to wait? My wife just applied for the Saphire under her name.

  16. Gary said,

    @Randy don’t need to wait – you can get a business and personal at same time in my experience. With personal cards I find it’s usually 60 days.

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  21. Max said,

    The credit score over the bureaus works the same all over the world
    eg. can I churn cards in Italy as you do in the us?

  22. Gary said,

    @Max – I am not at all an expert on Italy

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