Published on November 26th, 2013 | by William Charles1
Are There Any Drawbacks To Applying For As Many Credit Cards As Possible?
I read your introduction to credit card churning and I want to make the most of those sign up bonuses you mentioned. What are the drawbacks to applying for as many of the credit cards as possible. Tony – Omaha
Applying for new credit will cause your credit score to drop (usually by about 5 points, but this will increase if you have a thin credit history or a lot of recent applications). If your score drops too much, you won’t be approved for the credit cards you applied for and thus won’t be able to receive the sign up bonus.
A lot of card issuers will also only let you apply for a card once. So if you apply for a ton of cards with great sign up bonuses and get rejected, you won’t be able to apply for them in the future when your credit score rebounds.
There is something which is known as an app-o-rama, which involves making multiple credit card applications on the same day so the credit card issuers don’t know about the other cards you’re applying for. If you decide to go this route then only apply for one card with each card issuer (e.g one card from chase, one from barclays’ etc). Also don’t go overboard, even people with excellent credit scores and a lot of experience with card bonuses generally only sign up with three cards every app-o-rama.
Also make sure you check your FICO score before applying for any cards and check on forums such as Credit Boards to see what other scores people who have been approved for have. If your score is low you’re going to be limited in the cards you can sign up for.
I’m 19 and currently studying full time. I’d like to have a good credit score when I finish University so that I’ll be able to get a mortgage when I’m fairly young. I know that the Average Age of Accounts (AAoA) is a factor in working out your credit score, my plan is to apply for a bunch of credit cards and then let them age. That way I’ll have a high AAoA by the time I want to apply for a bigger loan. Thoughts? – Jamie, California
This is a question I get quite a lot when I tell younger people that AAoA is a factor in their credit score. Getting a credit card when you’re under the age of 21 has become significantly harder after the introduction of the credit card act in February 2010.
You need to have at least one of the following:
- Sufficient income to cover the credit obligation
- A parent/guardian/spouse as a co-signer
Given that you said you are studying fulltime I think it’s safe to assume that you don’t have sufficient income to cover a credit card (especially multiple credit cards). Your only option is to have your parent/guardian or spouse to act as a co-signer for you. The issue with this is that the applications will appear on both your and their credit reports.
As we mentioned above, applying for new credit causes your credit score to drop slightly. So anybody that co-signed for multiple cards with you would have their score drop multiple times ~5 point drop for each application, although it usually drops by more when multiple applications are made in a short space. So your co-signer could be looking at a drop of 20+ points for three applications.
Your co-signer is also risking their credit history, if you don’t pay the bill on time it effects their payment history (35% of a FICO score) as well as yours.
Getting a credit card young in life is worth doing, but only if you’re financially disciplined. One card will be enough to help age your oldest account (if you don’t already have any other credit accounts open) and most parents will be happy to co-sign if they believe you’re financially responsible enough for a card. It’s important not to betray that trust, as it could ruin your co-signers credit history and hinder them getting the best rates in the future.
We hope these questions helped, if you have any more questions feel free to ask us in the comments section.