Shocking credit card poll
 

Given how people here will seemingly do anything for miles (see this credit card thread: http://www.flyertalk.com/forum/Forum.../004580.html), I was surprised at how few of us switch credit card allegiances multiple times.

As of 8 a.m. ET Jan. 19, these were the results of Randy's AirPoll:
How many times have you switched your credit card program allegiance?
Never: 38%
1-2 times: 37%
3-4 times: 16%
>4 times: 8%

Applying and opening/closing credit card accounts reflects poorly on your credit report. Anytime a lender CHECKS your credit, this can have a negative effect. I've been turned down for credit because of this.

I've opened and closed more credit card acounts than I can count for FF miles and it has had no affect on my ability to get credit. Perhaps it only matters if there are other concerns (I'm not trying to infer anything negative about anyone).

Have to agree hacker. Same experience here.

I have heard that too many credit card thing from the "advisors" many times as well. I currently have at least a dozen cards and would open another one tomorrow if they gave me some deal. I had one recently (US Air) try to charge me a fee. I called them and canceled the day I got the bill. In the past, when I wanted to cancel due to a fee, they usually would waive it. The heck with em.

I've had 21 Visas and MCs open at one time, none with annual fees. Much older and wiser now, I only have two or three and most have fees, but all have affinity programs. Who has time for all the junk mail associated with multiple cards? Unless you are planning to max out charges and advances and then leave the country, stick to a few cards that you can regularly use to maximize your miles or points.
A point of interest from someone who worked a couple years in the charge card industry...the credit and charge card issuers figured out in the late 1980's that college grads would stick with cards they had prior to graduation, so they started marketing to college students aggressively. In the 1990's they also went after high schoolers. I'm not surprised at Randy's results for the general population, but I am surprised that FT'rs, who in general try to manipulate the system to maximize their mileage and points would not apply this to their credit cards. Maybe most that stay with the same card are also those that don't pay it off entirely each month and are therefore in a continuous debt cycle, forcing them to keep the card.

I've heard the same thing about the number of inquiries into your credit adversely affecting your credit score number used in the mortgage process. I think you get a loss of some points for each inquiry.

I change my credit card about every six months to get low rates. Never had a credit problem in my life.

I have been told the number of inquires is only relevant within a specified period of time (i.e. greater than 10 inquired in 6 months). There is no permanent impact to having a large number of inquires in a short period of time.

I read somewhere that too many credit cards will affect your credit history also.

To me changing credit cards are just a hassle now since many of my accounts are linked it...and it requires alot of changing. http://www.flyertalk.com/forum/frown.gif

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Well, maybe your credit rating is affected by credit card inquiries, but I suspect it would take a fairly large number of card applications ot have much of an impact, not one or two a year incurred by adding cards for mileage.

In other words, the truism would apply to people who have made 20 or 30 credit card applications in a relatively short timeframe and not people who apply for a new card once or twice a year.

FWIW, I have applied for credit cards for mileage purposes once or twice a year and it has had little or no impact on my crdeit rating.

FWIW 2, you can get your FICO credit rating at the web sites for credit bureaus like http://www.experian.com and see for yourself!

For those of you who have "opened and closed more credit cards than you can count", have you checked your credit reports lately? Are all those closed accounts still listed there?

I have accounts on mine that I closed ten years ago. They are indicated as closed accounts on the report -- but if you have opened and closed a huge amount of accounts, that would sure be one heck of a messy credit report.

As for having many credit cards open at the same time, I don't think it is detrimental unless you are applying for a credit card or a mortgage at a local, more conservative "old style" bank that is more cautious and less savvy than the big national banks. For example, it is only my local credit union that has ever made an issue out of how many credit cards I have when I applied for their card.

The same is probably true for mortgages. If you apply at regional local bank, they may make an issue out of it. But a big national mortgage company probably won't.

Like a lot of things, credit scores don't always make sense. When a lender, whether that be auto finance, home mortgage, retail credit, or whatever, pulls a credit report, they almost always request a score on you as well - commonly referred to as a FICO score. Many also now have their own decisioning software to produce their own scores. The Fair Isaac , or FICO, model was the mother of this "invention".

Scores range from the "don't have a prayer" level - say below 620 - to the "you can have anything you want" level - say 800 (though the upper limit is theoretically 900).

Yes - inquiries affect your score negatively. Since those making the most inquiries are typically shopping credit hard and fast, hoping someone - anyone - will approve them, the creditors associate such behavior with risk. However, after much public outcry, a couple of key changes have been made.

There are two basic inquiry types: soft and hard. Soft inquiries are you pulling your report, or an existing creditor of yours just checking to make sure your creditworthiness is still OK overall. A hard inquiry is associated with you making application for credit.

Soft inquiries no longer impact your score. Multiple hard inquiries are what can hurt you. But the second improvement they made in the last few years was to add something called de-duping logic (eliminating duplication). This logic will allow multiple inquiries made in a short period - 14 days to 30 days usually - for a particular purchase - specifically an auto loan or a home mortgage - to count as one inquiry. But if you shop credit slowly, and your inquiries move outside of this de-duping window, your score will be penalized. I might also add that there is no de-duping logic I'm aware of for other types of credit application - credit cards, retail credit, insurance, etc.

How much it affects your score is a mystery as the formulas for scores are highly proprietary and very hush-hush. But it doesn't take much to throw you into a bracket causing a higher interest rate on your loan or credit line.

Also of interest is the genre-adjusted score. For instance, an auto-adjusted score. So if you in general are a slow payer but ALWAYS pay your auto loan on time, points are added to your otherwise lackluster score to reflect your implied risk in an auto loan situation. I know they do this for home and auto, but I'm not sure if it is adjusted for other types of credit.

As for multiple cards. What that represents to a potential creditor is untapped risk. If you have 10 credit cards, each with a limit of (for example) $5,000, to a potential creditor you have $50,000 of debt because at any moment, you could create exactly that. So they view your ability to repay as if you have maxed out each line of credit. You may get the loan, but you won't get the best rate.

Aren't you sorry you asked? I think Fair Isaac has their own website now, but certainly if you key in "Fair Isaac" in google or some such, you should find out more than you ever wanted to know..

I opened an airline affinity card account in 1987 and have never switched.

svpii is right on the ball. A couple other things of note:

• All hard credit inquiries remain on your credit report for 7-10 years, depending on the credit bureau.
• FICO score calculation typically looks at the number of credit inquiries only in the prior six months.

What this means is that a potential creditor that uses FICO score and not much else will not mind if you switched credit cards and/or cancelled and reapplied a few times in the last several months, however a potential creditor that manually reviews your credit history -- i.e. mortgage lender -- may be concerned.

A person shopping around too much can suggest that the person is more credit hungry than what should otherwise be suggested from the person's income, payment behavior, and other financial data. This can cause some red flags to be raised. The mortgage lender may also conclude that the person will jump at the lowest rate too quickly, and would therefore charge more points to get some upfront revenue. Potentially, those extra 5000 FF miles on some airline can cost thousands of dollars in interest charges or points.

Because credit evaluation uses so many relative variables, what is greatly detrimental to one person's credit may not be substantial to a different person.


But, I'm not shocked by the results of the poll because of the general 1:1 relationship between credit issuer and airline -- and were more or less with the same airline for several years.

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On the road, In the air,
I enjoy travel, From here to there.

I don't totally get this. Are there offers that give you miles just for signing up that DONT also charge a signup fee?

I didn't know the poll would generate so much interest in credit scores. Here's a good piece on credit scoring:
http://www.bankrate.com/brm/news/spe...sp?prodtype=cc

The number of credit cards you have (and how often you switch) plays a part in your score because one of the numbers computed is your average length of credit history. Having accounts for a long time is better than having them a short time and every time you switch you are reducing your average.

But bear in mind that length of credit history is just one of many factors that's used to get a credit score.

IMHO, the negative effects of card surfing for miles are being way overblown here. A quote from the bankrate.com article:

However, experts say that inquiries typically account for less than 5 percent of a consumer's credit score.

"The inquiries are the least significant factor considered by FICO scoring models," says Craig Watts, consumer affairs manager for Fair, Isaac and Co. "Much more important is how you pay your bills and how much you owe. Those two factors make up two-thirds of a score."



[This message has been edited by dhacker (edited 01-21-2002).]

I did have a problem once obtaining a mortgage because I had too many credit card accounts open. They told me that they took the total credit available to me on all accounts and figured out the minimum monthly payments on that, and then used that against my total income. Some credit cards keep increasing your credit line and you really don't notice - I had one over $14,000 - which can count against you. I now keep just 4 or 5, Starwood Amex, AAdvantage MC, Hilton Amex, Hilton Visa, and 1 that I open and close to get bonus points.

I'm sure this is true, but its a different issue than the effects of multiple inquiries or opening then closing accounts.



[This message has been edited by dhacker (edited 01-21-2002).]

This is very informative topic, thank you for starting it and thanks to all who have contributed.

I don't think i have great credit...as I had big problems in the good ole college years...i was typical, had 10 cards and transfering balances amongst them like crazy.

For the mortage...the broker told me that my credit is not great but he can work it out as long as I pay off the DC bill, i explained to him that the DC bill has a 60-day billing cycle..what he sees is only for 30 days... so out of pure luck of meeting this great guy...my mortage was approved! (personally, i think he being a Chinese broker gave me some slack,)

FWIW, i had more trouble getting AMEX cards then anyone. They kept saying that my score is not up to their standards...and when they finally approved my Starwood card...they only gave me $2k http://www.flyertalk.com/forum/frown.gif



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Afang, have you ever called to try to get your Starwood limit raised? They gave me $2k also, but after 6 months you are eligible to request a limit raise. When I called to ask them to raise it, they said that since my account was in good standing, they could raise it as high as $20k without doing an income verification, or further credit check. I had them raise it to $10k. As I never have more than about $2k on it, I'm goign to get them to cut it, as I am cleaning up my credit card accounts in preparation for obtaining a new mortgage soon.

http://www.the-dma.org/consumers/offmailinglist.html

This is little off topic, but there is form letter you can print and mail into the Direct Marketers Association and have your name removed from many of those unsolicited junk mail lists. I did this at my last address and was amazed at the reduction of junk mail I was receiving, including unsolicited credit card offers.

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Rachel
CO - Platinum
Hilton - Diamond
SPG - Platinum

I'm kind of new to this, but I'm a little confused: I was just about to sign up for an American Airline credit card deal that offered 5,000 bonus miles, but it had a $50 fee. Are there offers like that, but that don't require fees?

The point of the bonus is that it should outweigh the annual fee. For example, last year the NWA Visa had a 10K bonus for signing up and then a 3K bonus for auto-billing. So that 13K miles worth about $325 (at 2.5 cents/mile) for an annual fee of $90.

Standard affinity cards carry a fee, which is why savvy card users will wait for a bonus to switch cards.

Howyadoin, welcome to FT! The offer you got is a good one, but some people have been able to hunt and find offers for up to 10,000 AA miles for the same $50 annual fee. Do some searching for 'Visa' and 'Citibank' in the American Airlines & Visa/Mastercard forums and you may find the info.

dhacker The operative word from your posts is 'typical'.

A credit score calculation takes into many variables. The multiple opening and closing of credit lines may not be harmful for some people -- even many people -- but for others it can be quite bad. The potential damage depends on other aspects of the person's credit history, current behavior, and type of loan that the person wants/needs today.

Agreed -- as I tried to say in my original post to this topic http://www.flyertalk.com/forum/smile.gif

Early last year we opened a business. Since we personally had to guarantee everything, I was getting credit checks out the wazoo (checking account, line of credit, bonding, equipment loans, company credit cards, etc.). The first time the bank ran a credit check, my FICO score was 751. Three months later I applied for a personal credit card (trying to get the bonus) - I was turned down because of too many inquiries. When I called them, they said my FICO score was down to 650 because of the number of inquiries - no late payments in five years, but too many inquiries.

Since we're looking to buy a house, I haven't changed credit cards since then and my FICO score has come back to a decent level (so my mortgage broker says).