Credit card impacts to your credit rating - Revision history

Editor: Editor moved page Credit Card Impacts to your Credit Rating to Credit card impacts to your credit rating without leaving a redirect

2021-02-19T05:28:42Z

Editor moved page Credit Card Impacts to your Credit Rating to Credit card impacts to your credit rating without leaving a redirect

Editor: /* Once you have a bunch of cards, applying for an additional card will drop your score 3-5 points for one year */

2021-02-13T01:31:06Z

‎Once you have a bunch of cards, applying for an additional card will drop your score 3-5 points for one year

Editor at 20:00, 12 February 2021

2021-02-12T20:00:16Z

Editor: /* For many people, the improvement in their credit utilization rate will outweigh the other factors and make their scores go up */

2021-02-01T21:07:30Z

‎For many people, the improvement in their credit utilization rate will outweigh the other factors and make their scores go up

Editor at 21:07, 1 February 2021

2021-02-01T21:07:03Z

Editor at 21:01, 26 April 2020

2020-04-26T21:01:10Z

Editor at 20:58, 26 April 2020

2020-04-26T20:58:13Z

Editor at 20:57, 26 April 2020

2020-04-26T20:57:28Z

Editor: /* For many people, the improvement in your credit utilization rate will outweigh the other factors and make your score go up */

2020-04-04T22:32:38Z

‎For many people, the improvement in your credit utilization rate will outweigh the other factors and make your score go up

Editor: /* What happens when you get an additional card? */

2020-04-04T22:28:38Z

‎What happens when you get an additional card?

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 For example, if you have a single credit card and are charging and paying off 40-50% of your credit limit each month, you probably think you are demonstrating that you a good credit risk—after all, you haven’t extended yourself with too many credit cards and you are paying off your card each month. However, to the bank, it looks like you are using up half of your available credit and their risk tables say that you are somewhat likely to run into credit problems.
-{{ImageX|Utilization.jpg}}
+{{ImageX|Utilization.jpg|360}}
 If you get another card with the same size limit, suddenly you are only using 20-25% of your available credit, even though you are spending and paying off the same amount of money each month. Get four more cards, and you are only using 8-10% of your available credit. From the bank's perspective, if you are hardly using any of your credit, you are unlikely to run into credit problems and your credit score rises.

@@ Line 10: / Line 10: @@
 <li>'''The truth is surprising—applying for a handful of new credit cards can often significantly IMPROVE your credit rating'''. Several of us have had our credit ratings improve significantly from the time when we only had a card or two to the time that we had signed up for a bunch of useful cards.</li>
-<li>'''In addition, you can monitor your credit score throughout the process and make sure that there are no significant negative impacts'''.</li>
+<li>'''In addition, you can monitor your credit score throughout the process and make sure that you aren't experiencing any significant negative impacts'''.</li>
 <li>'''Thousands of people make it their “hobby” to collect (and use!) millions of points through the relatively easy process of signing up for credit card bonuses'''—it hasn’t killed their credit and it hasn’t stopped them from getting approved for new cards.</li>
-<li>'''However, it is CRITICAL that you can use these cards responsibly'''. If you get the cards and then start missing payments, you will indeed damage your credit rating. If you get the cards and start using your newly available credit to buy stuff you wouldn’t have otherwise, you’ll damage your financial life.</li>
+<li>'''However, it is CRITICAL that you can use these cards responsibly'''. If you get new cards and start missing payments, you will indeed damage your credit rating. If you get new cards and start using your newly available credit to buy stuff you wouldn’t have otherwise, you’ll damage your financial life.</li>
 </ul>
@@ Line 51: / Line 51: @@
 <ul class="bulletlist">
-<li>'''The banks will usually make a credit inquiry''' (Amex often skips a full credit pull for existing cardholders). This will negatively impact the recent credit (10%) part of your score. This effect only lasts one year and is greatly reduced after just 90 days. However, the fact that you applied for a new card (as opposed to any credit score drop) might impact credit decisions for up to two years. Many lenders look at lots of credit inquiries as a sign of credit risk, independent of your actual credit score. </li>
+<li>'''The bank will usually make a credit inquiry''' (Amex often skips a full credit pull for existing cardholders). This will negatively impact the recent credit (10%) part of your score. This effect only lasts one year and is greatly reduced after just 90 days. However, the fact that you applied for a new card (as opposed to any credit score drop) might impact credit decisions for up to two years. Many lenders view larger numbers of credit inquiries as a sign of credit risk, independent of your actual credit score. </li>
 <li>'''Your overall amount of credit will go up'''. Since your spending will (hopefully) remain the same, your credit utilization (30%) will drop.</li>
@@ Line 74: / Line 74: @@
 <ul class="bulletlist">
-<li>'''Once your credit utilization score gets below about 10%, getting new cards stops having much of a beneficial effect on your credit score'''. Each new card has just the small negative impacts.</li>
+<li>'''Once your credit utilization score gets below about 10%, getting new cards stops having much of a beneficial effect on your credit score'''. Each new card just causes the small negative impacts.</li>
 <li>'''Expect your score to drop about 3-5 points''' when you apply for a new card. This is true for all cards you apply for, regardless of whether you get approved or not, and is also true for small business cards that you are guaranteeing with your social security number.</li>

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 {{TOC}}
 *[[#How your credit score is calculated|How your credit score is calculated]]
-*[[#What happens when you get an additional card?|What happens when you get an additional card?]]
+*[[#What happens when you get a new card?|What happens when you get a new card?]]
 *[[#For many people, the improvement in their credit utilization rate will outweigh the other factors and make their scores go up|For many people, your score will go up]]
 *[[#Once you have a bunch of cards, applying for an additional card will drop your score 3-5 points for one year|Later, your score will drop 3-5 points]]
@@ Line 46: / Line 46: @@
 </center>
-=== What happens when you get an additional card? ===
+=== What happens when you get a new card? ===
 When you apply for a new credit card, it impacts your score in several different ways:

← Older revision	Revision as of 05:28, 19 February 2021
(No difference)

@@ Line 4: / Line 4: @@
 {{ImageX|CreditReport.jpg|full}}
-Many people are concerned about getting “too many” credit cards, because they believe that it can’t be good for their credit rating.
+Many people are concerned about getting “too many” credit cards because they believe that it can’t be good for their credit rating.
 <ul class="bulletlist">
-<li>'''The truth is surprising—applying for a handful of new credit cards can often significantly IMPROVE your credit rating'''. Several of us have had our credit ratings improve significantly from the time when we only had a card or two, to the time that we had signed up for a bunch of useful cards.</li>
+<li>'''The truth is surprising—applying for a handful of new credit cards can often significantly IMPROVE your credit rating'''. Several of us have had our credit ratings improve significantly from the time when we only had a card or two to the time that we had signed up for a bunch of useful cards.</li>
-<li>'''In addition, you can monitor your credit score throughout the process, and make sure that there are no significant negative impacts'''.</li>
+<li>'''In addition, you can monitor your credit score throughout the process and make sure that there are no significant negative impacts'''.</li>
-<li>'''Thousands of people make it their “hobby” to collect (and use!) millions of points through the relatively easy process of signing up for credit card bonuses'''—it hasn’t killed their credit, and it hasn’t stopped them from getting approved for new cards.</li>
+<li>'''Thousands of people make it their “hobby” to collect (and use!) millions of points through the relatively easy process of signing up for credit card bonuses'''—it hasn’t killed their credit and it hasn’t stopped them from getting approved for new cards.</li>
-<li>'''However, it is CRITICAL that you can use these cards responsibly'''. If you get the cards, and then start missing payments, you will indeed damage your credit rating. If you get the cards, and start using your newly available credit to buy stuff you wouldn’t have otherwise, you’ll damage your financial life.</li>
+<li>'''However, it is CRITICAL that you can use these cards responsibly'''. If you get the cards and then start missing payments, you will indeed damage your credit rating. If you get the cards and start using your newly available credit to buy stuff you wouldn’t have otherwise, you’ll damage your financial life.</li>
 </ul>
@@ Line 40: / Line 40: @@
 % of your score is based on '''how many types of credit you have'''—personal, home, auto, etc.
-'''You can easily get free access to your credit reports''', and see how you’re doing overall, and with each component of your score.
+'''You can easily get free access to your credit reports''' to see how you’re doing overall and with each component of your score.
 <center>
@@ Line 51: / Line 51: @@
 <ul class="bulletlist">
-<li>'''The banks will usually make a credit inquiry''' (Amex often skips a full credit pull for existing cardholders). This will negatively impact the recent credit (10%) part of your score. This credit score effect only lasts one year and is greatly reduced after just 90 days. However, the fact that you applied for a new card (as opposed to any credit score drop) might impact credit decisions for up to two years. Many lenders look at lots of credit inquiries as a sign of credit risk, independent of your actual credit rating. </li>
+<li>'''The banks will usually make a credit inquiry''' (Amex often skips a full credit pull for existing cardholders). This will negatively impact the recent credit (10%) part of your score. This effect only lasts one year and is greatly reduced after just 90 days. However, the fact that you applied for a new card (as opposed to any credit score drop) might impact credit decisions for up to two years. Many lenders look at lots of credit inquiries as a sign of credit risk, independent of your actual credit score. </li>
 <li>'''Your overall amount of credit will go up'''. Since your spending will (hopefully) remain the same, your credit utilization (30%) will drop.</li>
@@ Line 60: / Line 60: @@
 </ul>
-=== For many people, the improvement in your credit utilization rate will outweigh the other factors and make your score go up ===
+=== For many people, the improvement in their credit utilization rate will outweigh the other factors and make their scores go up ===
-For example, if you have a single credit card and are charging and paying off 40-50% of your credit limit each month, you probably think you are demonstrating that you a good credit risk—after all, you haven’t extended yourself with too many credit cards and you are paying off your card each month. However, to the bank, it looks like you are using up half of your available credit, and their risk tables say that you are somewhat likely to run into credit problems.
+For example, if you have a single credit card and are charging and paying off 40-50% of your credit limit each month, you probably think you are demonstrating that you a good credit risk—after all, you haven’t extended yourself with too many credit cards and you are paying off your card each month. However, to the bank, it looks like you are using up half of your available credit and their risk tables say that you are somewhat likely to run into credit problems.
 {{ImageX|Utilization.jpg}}
-If you get another card with the same size limit, suddenly you are only using 20-25% of your available credit, even though you are spending and paying off the same amount of money each month. Get four more cards, and you are only using 8-10% of your available credit. From the bank's perspective, if you are hardly using any of your credit, you are unlikely to run into credit problems, and your credit score rises.
+If you get another card with the same size limit, suddenly you are only using 20-25% of your available credit, even though you are spending and paying off the same amount of money each month. Get four more cards, and you are only using 8-10% of your available credit. From the bank's perspective, if you are hardly using any of your credit, you are unlikely to run into credit problems and your credit score rises.
 Because your credit utilization is such a major part of your score, this change outweighs the smaller negative changes for the credit inquiry and the small decrease in your average age of accounts, and voila!, your credit score increases.
@@ Line 76: / Line 76: @@
 <li>'''Once your credit utilization score gets below about 10%, getting new cards stops having much of a beneficial effect on your credit score'''. Each new card has just the small negative impacts.</li>
-<li>'''Expect your score to drop about 3-5 points''', when you apply for a new card. This is true for all cards you apply for, regardless of whether you get approved or not, and is also true for small business cards that you are guaranteeing with your social security number.</li>
+<li>'''Expect your score to drop about 3-5 points''' when you apply for a new card. This is true for all cards you apply for, regardless of whether you get approved or not, and is also true for small business cards that you are guaranteeing with your social security number.</li>
 <li>'''However, applying for new cards will only affect the new credit component of your score for one year'''—cards older than one year are not considered new credit.  Applications will still be listed on your credit report for two years—so banks can see how many cards you’ve applied for, even if your score is unaffected. </li>