The first question I
always usually get when I’m explaining travel hacking to someone is –
“Doesn’t opening and closing credit cards hurt your credit?”
If I only had a dollar…
I’ve been signing up for and closing credit cards for about four years. I currently have 19 open cards and have opened/closed several more since starting this crazy “hobby.” In my short travel hacking career I’ve earned over 1 million points and have saved thousands of dollars on numerous trips. You’d think that my credit score would be garbage… You’d be wrong.
Here is a screenshot of my FICO Score according to the free snapshot provided by one of my (many) credit cards.
As you can see, it takes a slight dip in September. What happened in September? I signed up for three credit cards. I can hear people now, “aha! It does hurt your credit score.” Sure, but look what happened to my score in the subsequent years. Here’s my score as provided by another bank.
Again, it’s obvious that I did something to affect my credit in September. Signing up for three cards decreased my score just under ten points. Three cards. Less than ten points. Do you know how much I can do with the rewards from three credit cards?!
To summarize, yes, signing up for credit cards decreases your score in the short term. However, a new credit card reduces overall credit utilization by increasing total available credit. In the end actually increasing your credit score. Even though I’ve signed up for multiple credit cards over the years, my score has improved.
I’d never encourage signing up for credit cards if it will negatively affect your finances, so consider your individual situation before applying. If you have more questions before jumping in, please let me know. I love nerding out about travel hacking!
If you want to read more on what goes into determining credit scores, check out my post here.