What about my credit score?
One of our most frequently asked questions is:
If I open a bunch of cards, won’t that ruin my credit score?
It won’t - in fact, your credit score will likely increase if you follow our guidance! Let us explain.
Credit score factors
There are several different components that make up your credit score:
Payment history (35%): Do you pay your monthly statement on time? This is an important one because it makes up 35% of your score. We also recommend paying off your statement in full each month - not because it affects your credit score per se, but because accumulating points for free travel is counterproductive if you’re also paying high interest rate charges.
Amounts owed aka “credit utilization” (30%): This reflects how much credit you’re using monthly compared to how much total credit is available to you. You want this number to be low to show the banks you aren’t overextended, therefore making you a more trusted borrower.
Length of credit history (15%): Essentially, how long your credit accounts have been established. This is why best practice is to leave your oldest credit card accounts open, even if you rarely use them. It’s just not worth closing them if your credit score is dinged.
Credit mix (10%): The variety of credit accounts you have, e.g. credit cards, retail accounts, auto loans, mortgage, etc. You don’t need to have all these types of accounts, but the banks generally like to see a variety.
New credit (10%): Opening credit accounts frequently and in a short amount of time can look risky to the banks. That’s why we stress the importance of pacing yourself when opening new cards instead of applying in rapid succession.
Conclusion
Yes, new credit is a component of your credit score, however it’s one of the smallest pieces at just 10%. When you apply for a new card, you may see a slight decrease in your credit score, but it will only be temporary.
It’s important to note that payment history and amount owed are the most significant factors that make up your credit score. So even if you apply for new cards every 90 days, your credit score will actually increase if you:
pay your statements on time and in full (to boost your payment history which makes up 35% of your score)
control your monthly spending as more credit gets extended to you (to reduce your amounts owed or credit utilization which makes up 30% of your score)
This is the case for us. Since starting award travel, our credit scores have only increased despite regularly opening new credit cards. Currently, both of our scores are well above 800. In our experience, we never see a dip of more than a few points right after applying for a new card and it has only been temporary. Further, the banks have continued to approve our applications since our credit scores remain in the “excellent” range.
Let us know if you have any questions!
❤️ Liz
Friendly reminder: We are not financial advisers, we are simply sharing our method and approach with you. Of course, it's important to use credit cards responsibly. Pay off your balance in full each month to avoid interest charges, and never spend more than you can afford just to earn rewards.
