SchmeckFlyer

Can anybody shed light on the potential negative effects credit card churning (applying for multiple credit cards solely to earn rewards and/or closing accounts frequently) has on a US credit score? I have had the same three US credit card for 10+ years and started wondering if I should not explore new options (specifically looking at the Chase Sapphire Reserve) to take advantage of the bonussen one reads about everywhere that seem to lead to first class travels to faraway destinations for a pittance.

Two issues I imagine would be negatively affected by churning:​​​​​​
- number of hard inquiries leading to larger and/or lasting drops in credit score
- lowering the average age of accounts on file

My credit score is 793 and I would like to keep it high; in the end getting a better mortgage or apartment or job in future is more important than a few special offers. Currently, according to the credit bureaus, my biggest "issue" is short credit history (apparently being 36 is considered young), so I wonder if I might be disproportionately impacted if I start churning to take advantage of special offers et cetera. If I applied for the Chase Reserve I would want to close my Chase BA card; I have read about "product change" being a way to keep the current account open while getting a new card. Is that something people have experience with?

Any thoughts from the experts/experienced would be helpful. I tried finding similar threads but no luck, and Google searches lead primarily to hypotheticals and a lot of "could" and "may" rather than hard empirical experiences. Thanks!

EmailKid

The bad news is that the banks caught on and the gravy train is over - just see the thread where poster got auto approved for two Chase cards only to have one clawed back due to too many apps.
New Churner: Chase auto-approved, then revoked
Now if you are after just a couple or so, well that probably will not affect your score much either.

So choose your cards carefully @:-)

philemer

My wife and I have about 8-10 cards open at any one time. Since we started churning 10+ yrs ago our FICO scores have gone UP. Responsible use of cards is important though (make payments on time). HP (hard pulls) will only temporarily decrease your score. Opening 2 or 3 new cards a year will not be an issue. Go for it. AAoA is not not a big issue, IMO. Good to keep a couple cards 'forever' if you can.

hurnik

I've got like 25 open credit cards. 3 in the past 24 months (the others "fell off")

I just went on an app spree over the last 2 months (sept/Oct). 5 new accounts in 2 months. 4 hard inquiries. 4 were business cards, 1 personal.

The Amex SPG Business was not a hard pull, probably because I have other cards with them.
the others had 2 hits on Trans Union, 1 on Experian, and one on Equifax.
My score dropped 3 points from 830 to 827 (well at least on Trans Union).
However, the new account (the one personal one) seemed to trigger the biggest drop of 11 points.

I'd bet within 3 months the score will be back to its usual number again, although each bureau weights certain things more than others. I vaguely recall Trans Union is more sensitive to utilization vs. the other two.

ratracer

If you're talking specifically about scoring, both AAoA (average age of accounts) and AoYA (age of youngest account) are both relevant although the short term effect will vary from person to person and the impact dissipates over time as the accounts continue to age. The bigger question I think would be the relative sensitivity of the issuer to the number of recent queries.

Product changes are in most cases straightfoward but not all issuers will perform them and those that do frequently have limitations on which cards can be product changed to or from. In the US there is also a legal restriction imposed by the CARD act which under virtually all circumstances prohibits a product change from a card less than 12 months old to a different one that has a higher annual fee. You should be aware that unless done as part of a targeted promotion as an incentive to encourage a product change, in most cases product changes are excluded from eligibility for signup bonuses for a new card. .

More specifically in your case Chase does not allow product changes between their co-branded and Chase-branded cards. If you want a CSR you will have to apply for it, but you would be able to allocate credit limit between it and your Chase BA card.

meanderingtoes

In August I began opening cards for points. I've been approved for 8 new cards since then and my fico score went from 803-818. I didn't cancel any cards. I did switch the three that I had been paying annual fees on (citi aadvantage, chase mileage plus, and citi simplicity) to no-fee accounts which was easy to do. I was recently denied a HELOC on a rental property but, supposedly, it wasn't because of the card activity. (Start up expenses on a new business made them nervous about my income.) The lender appeared to only care about the balance on the cards, not the number of cards or recent new accounts. My understanding is that mortgage rates are expected to rise. If you agree, I would get the best mortgage that you can now and then start churning. As a landlord and employer, I wouldn't be concerned with a potential tenant or employee's churning activity. But I run small businesses and mid-range rentals, so I don't know how larger corporations would view it.

philemer

Welcome to FT and thanks for posting!

sdsearch

There is "heavy" churning and there is "light" churning (and everything in between).

"Light" churning (perhaps a few cards a year) should be no problem with regards to credit score and less of a problem with getting approved by banks, especially if you have decade+ old cards that you never cancel. It tends to also be easier to do for most people to do it with "natural" spend. Although to be able to apply for most Chase cards, you have to limit your personal card openings to about 2 a year on average (business cards from most banks don't need to be kept under this count). And BofA, as another example, has some unstated limit which we don't even know if it's constant, but it seems that it might be roughly similar to Chase's 5/24 policy.

"Heavy" churning (some people churn more than a card a month! ) requires much more skill to get the banks to keep approving (and keeping up with things, since banks constantly adopting new and different "anti-churning" measures). It's still less likely to create credit score problems (for someone with longtime "keeper" cards), but not getting approved by banks is a big enough problem, right? Plus for many people (without high business expenses) it's likely to require a lot of learning about Manufactured Spending (another constantly changing world).

darthbimmer

Good advice from sdsearch above. I'm in the "light" churner group and I have only rarely seen a hit to my credit score. It dropped from 820 to 790 several years ago when I was opening new cards every month (okay that wasn't quite "light" churning back then) and had also just closed my oldest cards. It took 6-8 months to get it back to where it was. Since then I've a) kept two "anchor" cards that are now 5+ years old and b) reduced my churning to 4 or fewer new accounts per year. My credit score is holding steady around 820.

Dadaluma83

I dont think a card or two every year will have that much effect on your score especially if you already have other established accounts. I would only cool it if you are planning on getting a mortgage in the relatively near future as naturally for a loan that large you want the best credit history you could possibly have, and mortgage lenders do question every inquiry, I had joined google fi cell phone plan about 8 months before I got a mortgage and chose to finance the phone, and the lender even asked about that inquiry.

Another question I havent seen answered very much by other churners and this conversation reminded me is when you cancel what do you say? I am about to get the 100k bonus on the Chase IHG card when my statement closes this month, then I am going to move on to the Chase Southwest card right after that. My plan is to wait about a year or so until the annual fee is about to come around again, then send Chase a secure message simply saying to close the account. I am also planning on making a few charges to the account each month just to show a history, so Chase doesnt think I opened the card just for the signup bonus then bailed on them. The wording in the terms and conditions about opening cards to generate rewards is kinda scary and I would rather stay off Chase's radar.

Is anyone else here able to easily close cards, ideally without speaking to a person or saying as little as possible? I'd rather not tell a CSR that I only got the card for the signup bonus, or have to make up a little white lie on why I am closing.

hurnik

I've closed cards via Chase SM without any issue.
However, I typically will try to call and see if there's any retention offers (unless it's for say, the Southwest cards, in which case, Chase *never* has a retention offer).

Personally I'd wait until the AF hits the statement, then call and see. Sometimes it's worth it for some extra points, etc. Sometimes it's not. It's up to you.
Even then, I'll wait until maybe 5-7 days before the payment due date and then cancel the card to get the AF refunded.

sdsearch

On the IHG card or the Southwest card?

For many people, the IHG card is a "net negative annual fee" card (ie, they get more out of the annual free hotel night cert than the cost of the AF), and why would you want to cancel a card that's paying you money for holding it?

Keep in mind that on a free night you don't pay taxes, so as long as the hotel night including taxes would cost more than the AF, you've come out ahead. Do you not have one hotel night you need a year which costs more than $95 with taxes where an IHG hotel would work for you?

blitzen

BugsyPal

Whatever hit to credit score taken by opening new lines of credit vanishes relatively quickly, and it isn't very large for a start.

What counts more is overall credit available versus utilization rates. This is because other than payment history the next biggest factor in credit score models is how much of a balance users carry not just on one card, but in relation to overall available credit.

Someone with fifteen cards say all with limits of 10k, but isn't carrying a balance on any of them, and or maybe three carry a balance < 20% will on average have a better CS than same person where five, six, ten or all fifteen cards are either maxed out and or carrying > 30% to 50% of total available credit limit. This even when both card holders have a history of *no* late payments or other negative actions in their credit file.

Top of every credit report shows total available credit versus overall utilization. Individual entries show total available credit versus last reported balance (if any), along with highest recent balance.

It varies by issuer and or type of card, but generally the best or better cards like the same customers they always have; people who seemingly do not need credit. That is they do not carry balances, and or if they do not for very long. Thus it makes no difference if such persons have 15, 150, or 1500 cards

vanillabean

I don’t churn and as such don’t speak from personal experience, but churning appears to imply closing cards not long after they have opened (for signup bonuses), so your average age of accounts isn’t impacted much. Of course credit card companies may close other older of your cards due to abuse, which certainly will make your score drop.