Credit Score Details – Churning FAQ

Most people immediately think opening 5 credit cards in a year as damning to your Credit Score.  The irony is is the opposite is often true.

Credit scores are calculated by looking at the data found in a credit report. This includes the following:

  • Payment history
  • Length of credit history
  • Credit utilization (total available credit / credit used)
  • Types of credit used (revolving/installment)
  • New accounts opened

…So at first, opening a NEW Account will have a minor negative impact on your overall CS.  But, after you rack up charges, and then immediately pay them off, you improve your reputation with the bank’s Algorithm.  This is especially true if you charge a lot of money, over a long time, and continually pay off all your debts.

While the proprietary algorithm is not public, a way to visualize it would be as such:

Say you currently have  a 700 Score.  You open 2 new cards; -10 points, -10 points.   Then you spend $10,000 on those cards over 5 months… +12, +12.  If you have older cards that are active, that improves your ‘Average Age of Accounts.’   If you don’t open up any new accounts, and keep spending on those 2 cards for the NEXT 5 months, in theory your score will go up another 5-15 points.

Each person’s score is different, and each Credit Scoring Company (TransUnion, Equifax, Experian) uses a different method for calculation.  In MY Case, opening up 9 cards over 2 years has had a Positive effect on my score.

Credit Score Image
Like Snowflakes, no 2 are alike!

 

 

 

 

 

 

Dr. of Credit has more information on this, and other financial tips.  There you can learn about the difference between a ‘FICO‘ and FAKO Score, as well as methods one can employ to boost one’s credit worthiness.

 

Churning Frequently Asked Questions

What kind of credit score do i need to get into this Game?

A) The minimum most agree on is 650, though folks have been approved with less.  That only gets you into the entry level cards like the Chase SouthWest or Freedom.  For the nicer Barclay / Sapphire products, youll need at least a 700.  If you have above 750, you are more likely to be able to pull off 3 approvals in 6 months.

 

Is it OK to start ‘Churning’ Credit Cards if I plan to buy a house / card soon?

A)  No, it is not recommended.  Make your large purchases first, THEN start applying for credit cards.

 

How many cards can I safely apply for at once?

This is up for debate, depending on your Credit.  My advice is 2, one hotel and one flight related card at first.  Later on, diversify with a ‘Rewards Portal’ Card like Chase’s Sapphire / Ink or Barclay.  I like to spread the applications out across 100 days, ‘2 in Jan, 2 in April’ etc.

 

Should I keep my cards open to improve the ‘Average Age of Accounts’? 

Only if they do not have an annual fee.  Otherwise, you’re paying for a negligible increase to your score.  That hardly seems worth it.

 

Can I buy Flights & Hotels for someone else, using my points?

In most cases, YES!  But you (the Account Owner) have to purchase them directly with points, and list the person you’re buying for as the name on the ticket.  Certain hotels have check in restrictions, but that can sometimes be subverted by calling ahead.  With Airlines, its been very easy for me to ‘buy’ tickets for other people using points.

 

Can I have someone else open a Credit Card in my name so I can get the points? 

This is not a wise idea.  They would be on the hook for any debts you incur, and they would get no benefit since you would be getting the points… Cards they get ‘for you’ could not be used for themselves in the future.  They would likely have to buy the tickets (with points) in for you, using THEIR ‘Points’ Account.

 

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