Since I started posting about all the credit card offers I take advantage of, as well at the 0% balance transfers (which are currently earning about $116 per month in interest at Emigrant Direct), there has been a lot of interest in the impact on my credit score of maxing out cards and opening and closing multiple accounts. Looking back, I wish I had obtained my credit score back in March, immediately prior to starting my mini app-o-rama, as well as periodic check ups to see how much it fluctuated.
I can tell you that within the two years prior to starting my app-o-rama, I received various credit scores, all within the range of 750-780. So I will estimate that my credit score was 770 prior to my credit card application spree. Below I will try to list an estimate of all the cards and accounts I've applied for since March 2005 and the benefits I've received from them.
Citi Platinum Select in March 2005 - $100 Target Gift Card (acct still open)
Charles Schwab MBNA Visa - $150 Visa Gift Card (acct closed and credit line transferred to another MBNA credit card). Hubby also took advantage of this one and just recently received a $100 gift card.
Sony Visa Card (twice) - 2 $100 card credits (one was within the last two months)
Bank of America Checking account - $100
Citibank Checking - $100
Total - $650
I used the Citi Platinum card above (after I received my gift card) to do one balance transfer. I also opened a Discover card, and a Chase card for balance transfers. All of those cards are currently in the 90-95% utilization range. So far I’ve received over $300 in interest (Emigrant is having technical difficulties right now, so I can’t verify the exact amount), and anticipate making $1200-$1300 before the 0% offers expire.
Also within the last three months I have obtained three store cards in order to receive discounts on purchases (this was normal habit for me prior to my app-o-rama), but I don't carry a balance on any of them. I also purchased a home appliance on a Sears card with no interest and no payments for 13 months and that card remains at over 50% of credit utilization.
Yesterday I checked my credit score via the free credit report for MBNA customers, and my score was a bruised, but healthy, 700. It was likely lower back in March, April, and May, when I applied for most of these offers, but it has recovered quite nicely. Now that I’ve taken care of a few correctable issues on my credit report, I anticipate it will go up a couple points. As the balances on the 0% BT cards goes down, I also anticipate my score to recover even more.
I have done a couple of things in order to keep my credit score somewhat healthy... I don't do balance transfers with MBNA, which means that I have almost $30,000 in available credit (that helps the credit score, as well as offers peace of mind). I also make sure I don't ever cancel my oldest credit line, which is my student credit card from college. I also close any of the new cards I open as soon as I get the promo $$. I've heard this can be good and bad, but it keeps the average age of OPEN credit lines higher, and it keeps me eligible for more promos ;)
I don't recommend that anyone who is in the market for a loan (mortgage, car loan, etc) go on a credit card app spree. I have a fixed mortgage, don't plan on refinancing, and our cars are paid for, so I knew I had a couple years at least in order to repair an credit issues that occurred. I can also pay those 0% BT cards off tomorrow if needed, since all of the money is sitting in an Emigrant Direct savings account. We also have Hubby's credit to fall back on. He's taken advantage of a couple offers, but has been very selective and hasn't beaten his credit up like I have.
There it is, explained as best I can. Let me know what you think....
15 comments:
Your credit score does affect more than just the rate you get on a loan. It's used in making hiring decisions; I read about a woman who was hired for a job but then had it rescinded when the company found out her credit score (and it wasn't a financial company that had hired her--it was a pharmaceutical co.). Plus, in New Jersey, some auto insurance companies use it to determine whether you are a "good" or "bad" driver--and hence should pay more for insurance. And, though you already own your home, credit checks are almost always done by apartment leasing companies to determine if they want to rent to you. So your credit score does have big implications, and is important to protect.
all good info there...seems like all that app churning hasn't had a large effect but a manageable one...I've definitely been wondering. Am tempted to do some smaller scale arbitrage these days before I lose the chance, but am determined to be careful (in all ways)
Stop applying for credit cards that you don't need. Keep 2 or 3 that you want and close the rest. It will take years to repair the damage done and it may not all be apparent yet, but it's not the end of the world.
Credit scores are overrated. I don't care what my score is anymore since I already have my loan for my home and I don't need a car. Seems like you are in the same boat, so I don't worry about it. As long is it is above national average, it's okay in my book.
thc -- as long as you keep the balance down, you shouldn't have to worry about how many credit cards you have. It's the available credit that affects the score -- if you keep your total % down, it shouldn't hurt you.
Besides, you don't want to close your oldest card since that will really hurt your score.
nyc money: What, you're never going to buy another car or home?
Mike: Too much available credit can hurt you as much as having cards that are maxed out. Having a bunch of open credit card accounts, even if they have zero balances, will lower your score.
I recently went through our open credit lines, closed a few but still have well over a dozen open between my wife and I. We've got well over $100k in open lines (all unused except for what we buy each month and a 0% balance we're carrying) and both of our scores are in the mid to upper 700's (and I have a chap 7 on my records from 5 years ago). So I can't really agree that open credit lines are all that damaging to your score.
I will say this, I am not sure arbitrage deals like this are really worth the time. Sure, it's free money but by the time you've paid the taxes on the interest and the transfer fees (if any) the return is not all that much.
Many people take the same approach to 0% interest credit card offers. And if used properly, they can be a great tool to save money and pay off your debt! GREAT JOB!
Just be aware: a 0% APR doesn't mean FREE MONEY. If you don't switch your card again, you will pay interest eventually. Unless you can pay off the new charges before the intro period is over, don't over-use this type of credit card and create even more debt.
If everyone used such a disciplined approach to 0% credit cards, the credit card companies would quit offering them! Great POST and GREAT JOB!
This article is helpful
http://money.cnn.com/2005/10/04/pf/armchair_credit_score/index.htm
I read your post about the MBNA Credit Report offer, and I have to agree with one of the other commenters...You may have signed yourself for a subscription to a something. There is now a federally-mandated free credit report website at www.annualcreditreport.com that people should use instead of either paying money for a credit report or thinking they are getting a "free credit report" and at the same time signing up for a fee-based credit checking subscription service. I'm glad you said you read the fine print, but you should keep an eye on your bills to see if you start getting charged for something in the future.
steve - I still think the MBNA program is okay, but I will keep my eye on it.
I know about the free credit reports, but unfortunately, they don't include free credit scores. I like being able to see my report, but I find my score much more interesting ;)
I found your blog quite helpful, especially compared to any other sites I went to, looking for help. I just have one question, and I'm wondernigif you can even help or can direct me somewhere that can: Does transferring balances, multiple times, ding your credit? I have transferred twice in the past year or two (not sure how long exactly), to take advantage of 0% offers, and, was thinking of doing it again, now that my financial situation has improved and I want to pay down credit card debt quickly. But, will this look bad, transferring AGAIN to do that? any info you may have is appreciated! Thanks!
I have read some incorrect statements by the posters to the information given:
1. Having a lot of open accounts DOES NOT impact your credit score. UTILIZATION, however will greatly do so. It is best to carry a small balance( $5-$20)instead of $0, if you want to see your score at it's highest.
2. Newly opened accounts will impact your score momentarily, until there is age on these accounts. So, after opening new accounts, you will see a score dip due to the average age, but it will rebound.
3. Contrary to popular belief, closing an account will not hurt your score. That account will still be on your Credit Report, so you won't lose any of the reporting history just because you closed the account.
Great post on your App-o-Rama exploits. Would love to see an update on how things have worked out for you.
I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.
Betty
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