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Yes, absolutely!
One of the more confusing aspects of rewards travel is how applying for credit cards affects your credit score. Conventional wisdom has it that applying for more credit cards will negatively affect your credit score, and is somehow frowned upon by lenders and credit providers. But that’s not the case.
Your credit score takes a temporary dip when applying for new cards, particularly if applying for more than one in a short time span. But provided you keep your credit utilization rates low, pay your credit card accounts on time and in full every month, and incorporate your rewards cards into a well-balanced credit portfolio, adding more credit cards to your points and miles arsenal can increase your credit score over time.
Before we dive into how rewards cards affect your credit score, we need to call out that if you can't pay your credit card balance off each month, then your rewards points will provide a negative return. How? Expect to pay well over 10% interest on your utilized credit to earn 1-6% in points, miles, or cash back, quickly wiping out any tangible gains you make. Before you enter the cat and mouse world of award travel, recognize that it is a game of thin margins, and spend appropriately.
How Are Credit Scores Calculated?
Our post on how to manage your credit score covers this in more depth, but just to recap, credit bureaus calculate your credit score on the following criteria for your FICO score:
- 35% Payment History – late payments represent a much higher credit risk for lenders
- 30% Amounts Owed – also referred to as credit utilization rates or available credit vs. how much is in use
- 15% Length of Credit History -average age of revolving debt accounts
- 10% New Credit – hard pulls and new accounts show here
- 10% Credit Mix – entire lending portfolio i.e. car loans, mortgages, guarantor accounts, credit cards, etc
Essentially, lenders want to see you diversifying your credit portfolio over a sustained period, paying your bills on time, and keeping your utilization rates low. If you tick all these boxes, credit providers are often more than happy to offer you new cards and financial products, as you represent a ‘safe bet.’
We recommend keeping a close eye on your credit score, checking it weekly via a free FICO access offered on cards like the Barclaycard Arrival Plus® World Elite Mastercard® (See Terms) or The Amex EveryDay® Credit Card from American Express. Alternatively, use a service like Credit Scorecard from Discover or Credit Karma to ensure cards and payments are updating on your credit file correctly. This way, if anything untoward pops up that gives you cause for concern, you can immediately address the issue. For even more options, check out the full list of free credit score and reporting websites.
Why Do Credit Scores Dip When You Get a New Credit Card?
When you apply for a new credit card, the credit provider performs a credit check, otherwise known as a ‘hard pull.’ A hard pull helps them decide whether you’ll receive approval for the card, the amount of credit you'll be provided, along with the interest rate you'll hopefully never pay. Hard pulls or credit inquiries cause a small, temporary drop in your credit score. Expect a 2-5 point immediate drop per inquiry — this could be higher if you have limited credit, which you should expect for someone getting their first credit card.
Too many inquiries in a short space of time will cause a more pronounced dip in your credit score, one of the reasons we recommend spacing applications out over a longer period. The dip in your credit score starts to fade within weeks of the application. Typically you'll see the impact from that inquiry gone within six months and at the 12-month interval that hard inquiry likely has no impact on your credit score (depending on the exact scoring model and version used.)
From this point on, provided you follow the credit card best practices set out above, your credit card should start adding points to your credit score, helping to increase your credit score over time.
How More Credit Cards Can Help Raise Your Credit Score
Holding many credit cards can help raise your credit score by lengthening the combined age of your credit accounts, lowering your credit utilization rates, diversifying your credit portfolio, and showing your ability to manage a significant amount of revolving credit responsibly. All factors that play key roles in calculating your credit score.
Extend the Length of Your Credit History
One of the key factors credit agencies look at when calculating your credit score is how long accounts have been open. Having just one or two accounts open for a short length of time may count against your score initially, but over time it adds to the overall length of your credit history, gradually increasing your credit score. One of the reasons we recommend downgrading credit cards to small or no fee versions where possible, as opposed to canceling products outright, is credit lines with a long history can add meaningful weight to your credit score.
Reduce Your Credit Utilization Rate
Credit utilization plays a huge role in determining your credit score. Almost a third of your credit score is calculated by the way you use existing lines of credit, with lower utilization rates looked upon more favorably than high ones. So, how do more credit cards help lower your utilization rates? Provided you maintain similar levels of spending to before you expand your rewards card portfolio, adding more available lines of credit, and increasing the overall credit available lowers your credit utilization rate.
For example, if you have one credit card with a $10K limit and you charge $3K during the month, your utilization rate is 30%. If you have five credit cards with $10K limits for a total of $50K available credit, and you charge $3K during the month, your utilization rate is 6%.
- One credit card with $10K limit and you charge $3K per month: Utilization rate 30%
- Five credit cards with $10K limit ($50K total) and you charge $3K per month: Utilization rate 6%
Final Thoughts
So, can more credit cards help increase your credit score? Absolutely! If used responsibly and paid off in full each month, rewards-earning credit cards can not only help push your credit score higher but can provide access to amazing travel experiences at pennies on the dollar. And, higher credit scores equal better cards and better interest rates that you'll hopefully never use!
If you want to live in the points and miles world for the long-term and exchange credit card rewards for excellent travel adventures, you need to look down the road, not just now. Mix up the types of credit you access, don't apply for too many cards in a short space of time, keep your credit utilization rate low, and pay your accounts off in full each month. And make sure any card you pick up helps you focus on your travel goals.
If you have any questions or something to add to the conversation, we’d love to hear from you in the comments.
For rates and fees of the cards mentioned in this post, please visit the following links: Barclaycard Arrival Plus® World Elite Mastercard® (See Terms)
The comments on this page are not provided, reviewed, or otherwise approved by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.
Thanks for the info and breakdown. I don’t more than a few points temporary possible affect on my credit score if I get multiple new credit cards around the same time.
I never knew how each customer’s score was calculated. It is good to know such information.
I was freaked out when my score dipped heavily after opening a few accounts this year but now my score is about as high if not higher than when I started. Definitely useful if you have no immediate (~6 months) use for credit
This might be the thing that most people I talked to are surprised to learn. Less utilization (more credit) is so beneficial in the long run. Obviously money management matters most though.
Great overview. I still want to cancel a couple of cards I no longer want though (even though I know I’m better off keeping them open)!
It is healthy to want to “clean up” — but cleaning up isn’t always the best thing. Just get a proper folio to keep all your cards organized!
It is a great overview.
When you have cards that you really don’t want. Just use a pair of scissors, don’t ruin your credit by cancelling.
Well as long as they are not your oldest cards you should be ok
This is true in my experience I’ve had quite a bit of credit cards but with each application spread over time it really hasn’t had any negative impact on my credit score.
What is the typjcal minimum credit score for Travel reward cards? After a job loss we are climbing back out of a big hole. Credit score is 657 through Experian on credit tracker. In June I co-signed for a car for my daughter. Credit score was 675 then fell about 45 points for a couple of months then went to 657.
Denise, there is no hard/fast line and credit card issuers don’t provide this information, however, we scoured a little bit and put this together: https://awardwallet.com/blog/credit-scores-get-approved-top-rewards-credit-cards/
It’s a very temporary dip if you have a decent history.
I have had so many credit cards that have only helped me increase my credit in the long run due to the higher spending limit between all the cards. My credit utilization ratio because of them is really good and in the long run my credit gets always higher.
I used to hate leaving the cards I don’t use open, I can see over time it has helped my score though. Old habits are hard to break!
i told this to my friends many times but they dont believe me lol
Very interesting and thorough explanation of the full scenario of how new and varied credit applications affect overall credit. Thank you.
i had excellent credit before starting to play the points and miles game and my score has only increased (with temporary dips as described in the article) since that time. The key is always paying off your balance each month.
Yeah the credit card companies want you to spend on their cards and pay them fees and interest as necessary as long as you pay on time. Paying off all balances at the statement is always the best idea though
Thanks, always good to see a reminder about all of this…
I usually open only one new credit card a year and I pay my credit cards off each month so I have a good FICO score.
I find that owning a house also helps. I know this sounds silly, but after a few years of appreciation in your primary residence, those higher credit limits offers come quick and fast.
Yeah, but most of the times people open new lines of credit when they need the money and since opening new lines of credit reduces your score temporarily, it has more adverse effect than positive.
Thanks for the information. We use several credit cards and my biggest fear was that my credit score would dip. So glad to know this is not the caee. Will use the info here to increase card use.
Thanks for the detailed insight into the workings of credit scores. I was myself trying to give six months gap between each new application at Amex.
Another great article insight into travel related topics. I didn’t know about the small dip in your credit rating when you apply for a new card but good to see it recovers quickly.
lots of details here but if you are willing to work through it all it will pay off
FICO tells me that a hard pull stays on your record for 2 years, not 6 to 12 months as in the article.
Also, it should be pointed out that individuals are penalized if they do not have varied credit (installment loans, etc.). For one who does not have any debt at all, I can see that this is considered a negative (rather than a positive).
Finally, I have been an American Express Card holder for over 40 years, but I have changed Amex cards over the years in response to various underlying benefits, or upgrading from a Gold to a Platinum Card. Amex seems not to include the ‘total’ history when they do their reporting. Very annoying.
Chase, a hard pull absolutely stays on your credit report for 2 years. That said, the impact of that hard pull on your credit score drops over time. After 6 months most of the impact is gone and after a year, with FICO scoring models, you’ll find that there is no impact on your score with that hard pull. Yes, it’ll remain on your report, but its impact on your score is gone.
This is an interesting fact, as in Germany it is the way around – like totally opposite to that Idea – the more CC’s you’re holding, the worse your CreditScore is turning.
So back here one has to decide carefully, which Card to apply for.
good advice – though opening new ones can reduce average credit length quickly
Absolutely; however average age of accounts, as compared to other aspects is a relatively small amount of your overall score makeup.
This is so true! I used to only have one credit card for everything. I could not understand why my credit would not increase. I began to apply for everything and soon later, because of my debt to credit ratio, my scores shot up.
My score dipped 66 points for about two weeks when I bought a new car. The dealer had 5 different banks pull my credit in addition to the dealer pulling it. It is now back to 825 where it should be.
The more cards I get, the better my credit score becomes. I used to carry a score in the 775 range with the big 3 credit bureaus but when I paid my mortgage off a few years ago, my scores, including Fico, have been in the 800-825 range. I also think that paying cards off completely each and every month and not carrying a balance has a lot to do with my current scores.
Based on my (limited) experience, recent credit card applications don’t hurt mortgage chances as much as many sites lead you to believe. Obviously, take that with a grain of salt, it being one data point and it wasn’t like I took on hundreds of thousands of available credit.
Kyler, you’re spot on. Any mortgage issuer will want to know about recent card applications but as long as you have a reasonable explanation for anything in the past 2 years that is new they’re typically fine with it. The bigger issue is any impact to your FICO score, which could decrease your chance of the best possible interest rate. Again, everything varies on a case by case basis, but your logic is sound.
Great breakdown of credit scores and how having more credit cards can improve your credit score. Thanks for the helpful information.
It’s also a culture thing. In Europe (particularly Eastern Europe) credit cards are relatively unpopular.
I read something recently that the credit bureaus were changing the way (mix and percentage of factors) they use to determine Vantagescores, but not FICO scores.
here you go: https://awardwallet.com/blog/big-changes-coming-credit-scores-calculated/