Credit Cards

Credit cards and your credit score

I’ve received a few questions about whether this whole miles game is going to have an adverse impact on your credit score, and I’d like to address it here.

Short answer: No

Long answer: No, but

I’m going to quote wholesale from Moneysmart here

While a new credit card does actually affect your credit score, when you understand how it does, you won’t freak out as much.

When you first get approved for a card, your credit score might drop a little, as the overall age of all the credit facilities open to you is one factor. A new card lowers the average age and will thus have a slightly negative effect on your credit score. The bank will also check your credit report when you apply, and each inquiry gives your credit score a little hit.

However, in the long term a new credit card can actually improve your credit score. Remember how borrowing a lower percentage of the total amount of credit offered to you is a good thing? A new credit card raises your available credit amount, so assuming you don’t go nuts and start spending like there’s no tomorrow, your credit score could well improve.

In short, getting a new credit card is unlikely to cause all the demons to escape from hell, so you can put down your amulets now.

There is one exception, however—if you intend to apply for a loan anytime soon, it might be better to hold off on any new credit card applications for the time being.

TL;DR version: so long as you’re paying off your balances IN FULL and ON TIME, I wouldn’t lose too much sleep about having multiple credit cards open. There are much things that can happen to you credit score, like missing a payment or defaulting on a loan obligation.

If you’re at the stage where you’re about to take out a housing loan and every percentage point counts, then yes, you may want to hold off on the credit card applications. But otherwise, don’t get too worried.

More helpful articles on this topic here and here

cover photo by donharder

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