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Why churning credit cards will not always give you a low credit score

Updated: Jan 16

Every time I mention churning credit cards to anyone, I am always met with the response, "I heard opening and closing too many credit cards will damage your credit score." If I earned a dollar every time I had to explain why this is not always the case, I would probably have $30. So let me put this myth to rest once and for all and try to explain everything I know from my personal experience about why opening and closing many credit cards will not always damage your credit score. You can find more about why a good credit score is important when credit card churning in this post.

Mobile phone showing credit score from credit cards
You can still have a excellent credit score whilst churning credit cards in Australia

What negatively affects your credit score

Many people don't even know what a credit card score is let alone what affects it. Most people have heard that if you take out too many credit cards too often it will give you a bad credit score and will cause you to not be able to get credit cards in the future. Although technically they are not wrong, they may not be correct either. After going through more than 48 credit cards over a 7 year period in my journey churning credit cards, I will try to explain from my personal journey why this is not always correct and break down what I have learned can affect my credit score. This is not financial advice as I am not a financial advisor, just my experience from my personal journey so please talk to a licensed financial advisor in regards to your personal circumstances.

Pie chart showing how a credit score is calculated
Credit Savvy breakdown of what impacts a credit score

Payment history

The most obvious reason people's credit scores can be affected negatively is due to their history of repaying debt. The only real way for a lender to judge a customer's potential to repay any money they lend to them is by looking at their past and seeing if they were able to repay the debt on time and in full. Many banks will not trust a customer with their money if they have shown in the past they could not repay their loans or debts on time. This is especially true if they default on a loan, as future lenders will think if they borrow their money they will not return it. No bank wants that. So every time a customer takes out a loan that they don't pay on time or default on, they will be negatively impacted on their credit score. The more this happens the bigger the impact. So I always remember to pay off my credit card in full and on time.

Credit History

Just as it is important to have a good payment history, banks also like it when customers can prove that they can hold a loan for a long period of time. If they can prove that they are likely to be loyal to a lender by using their services, it builds more trust with other lenders that they will do the same with them. A trick I learned was to have at least one credit card open as a primary credit card for a long period of time. This works by showing lenders that I am willing and have a good track record of staying with a provider for a long period of time. The other benefit of having one account open for a long period of time is that I can use it as my fall back credit card, as I open and close the cards that I churn. I have been doing credit card churning for the last 7 years since I started my journey churning credit cards and have had no issues, as I have built up a good credit history by having a credit card open for more than 10 years now.

Inquiry Information

Finally, the last but most talked about piece of information that makes up someone's credit score is their inquiry frequency. Every time you apply for a loan or credit the financial institution for which the application is for will pull up a customer's credit report to evaluate their risk to lend money to them. This is called a hard inquiry. The more inquiries that are on their credit file, the more it looks like they are in a way reckless or desperate. Banks don't like too many inquiries especially if they don't result in a successful application as it does not look good on a customer's character. This only makes up about 33% of your credit score. The key takeaway here, is I make sure I only apply for credit cards that I am confident I will be successful in being approved. Also, I don't apply for more than 1 credit card per month which seems to be a rule of thumb that has worked well for me as well. If I have been unsuccessful with my application I will always call up the bank and ask for a reason. Then I will wait for the bank's recommended time before I apply again. Usually, any negative impact will be restored after a couple of months. To make sure I am successful in my application, I make sure not to hold more than 2 credit cards at one time which seems to work well with my personal circumstances and I try not to take out too much credit.

You can read more about this in my getting started section. or in my post, "What to do if my credit card application is declined."

Hopefully, now you have a better understanding of how your credit score is made up and what impacts it the most. I found that if I don't take out too much credit and make my repayments back on time and in full, then I should not have to worry about my credit score.

Like always, if you have any questions, please comment below or contact me. If you don't want to miss out on any new content, then follow me on Instagram or Reddit for more information about everything to do with credit card churning and point collecting.

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