Since I started blogging actively over past several weeks, I have received glowing reviews and the response from the readers has been all positive. This was an encouraging and so, I have decided to move the blog to our own domain, AwardGuru.com, which will provide me better flexibility than what was available under WordPress.
I thank you all for following my blog. I will continue on my mission of empowering readers to unlock their miles and points and to opti-maxi-mize their value!
Often the question is raised, how will the credit card applications affect the credit score and the credit file. I though it best to put my thoughts down in one of my post.
Disclaimer: I have no affiliations with any credit reporting agencies or the finance industry in anyways. What I am going to write below is for my personal notes and is based purely on my understanding of the credit file. I have gathered knowledge from several trials and errors while closely following the changes on my personal credit score after various credit inquiries and events in life. I am not claiming to be a professional in this field and cannot be held responsible for any consequences resulting from my post. I am posting here my personal observations for my record keeping.
Any new credit card application results in a hard inquiry on your credit file. And any hard inquiry on your credit file is invariably considered a negative and results in a drop in your credit score. How much the drop will be is dependent on a lot of factors like the credit profile at the time of inquiry, type of lender making an inquiry, frequency of inquiry, number of inquiries and many others, this list can be rather long.
Most people with clean credit history meaning no minor negatives in their credit file in the last three years and no major negatives in their credit file for seven years, perfect on time payments, diverse portfolio of credit accounts, total debt to total credit line ratio of less than 10% with at least seven years of active credit file should have healthy credit profile. The credit scores should be in the range of 725+ which is considered to be excellent for US markets.
In many cases, a hard credit inquiry should result in a drop of 10-30 points which should recover pretty quickly within 2-4 months. But I should point out that it can and really does vary from case to case and person to person. No two credit files are same and thus the effect of a credit inquiry will also be different.
One strategy that I follow is not to apply for credit cards too often. And when I do apply for credit cards, I pool them together and apply for all of them in the space of 30-60 minutes on the same day. Such a round of applications in our world is called app-o-rama where people club multiple (can be 2-12) credit card applications. I have 2-3 app-o-ramas every 12 months; thus an average of 4-6 months between two app-o-ramas. I should say that it has worked well for me. After every round, my scores take 20-25 point hit which recovers rather quickly in 2-3 months of diligent up-keeping of my credit file like on time payments, no additional unnecessary credit inquiries, low total debt-total credit line ratio, etc.
Before any app-o-rama, I sit down and gather 6-8 applications that are most lucrative at that time and that help me achieve my goals for airline miles, hotel points or proprietary reward points. Happy to say that it seems to have worked well for me. Some factors that are considered when processing your credit application in addition to your credit file include your employment history, your employer, your annual pay, your marital status, your residential status and some more.
Once again, please note that your credit file is the most powerful that you have. Learn to use it wisely. It will be worth it!