credit score and 1 year credit card use

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credit score and 1 year credit card use

Postby kwan2 » Wed Jun 26, 2013 2:45 pm

can someone tell me, if it is worth signing up for a credit card for one year (in this case to get 30,000 miles), if I plan on canceling it in 1 year, and don't plan on taking any loans (credit score) in the near future.

or in general, what the consensus is, or the strategy of grabbing the cc bonus and then canceling in 1 year. etc ; maybe even though i don't plan on a loan, it's not good because of how it does effect one's credit score ?
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Re: credit score and 1 year credit card use

Postby LAlearning » Wed Jun 26, 2013 2:54 pm

kwan2 wrote:can someone tell me, if it is worth signing up for a credit card for one year (in this case to get 30,000 miles), if I plan on canceling it in 1 year, and don't plan on taking any loans (credit score) in the near future.

or in general, what the consensus is, or the strategy of grabbing the cc bonus and then canceling in 1 year. etc ; maybe even though i don't plan on a loan, it's not good because of how it does effect one's credit score ?


Why 1 year? What happens in 1 year?

If it's something you'll continue to use (ie. favorite airline etc), then sure go for it. It really wont affect your score that much, but of course it depends on your current "credit" situation.

The credit score is there to tell a lender the chance you have on defaulting on a loan. It doesn't suddenly go from 820 to 400 because you opened a credit card. Don't worry about it unless you plan to buy a house. I'd be more worried about giving your SSN to another company, but that's just me. (hooray for credit freezes).
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Re: credit score and 1 year credit card use

Postby Mandrale » Wed Jun 26, 2013 2:55 pm

It really depends on what you want and your situation. What's the main advantage of those 30,000 points? Why cancel it after a year? First credit card? Do you need more credit history?

I just think there are too many questions to give you a straight answer, and ultimately, the decision is just based on what you think.
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Re: credit score and 1 year credit card use

Postby Default User BR » Wed Jun 26, 2013 5:05 pm

kwan2 wrote:can someone tell me, if it is worth signing up for a credit card for one year (in this case to get 30,000 miles), if I plan on canceling it in 1 year

Why do you plan to cancel it? Does it have a yearly fee?


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Re: credit score and 1 year credit card use

Postby campy2010 » Wed Jun 26, 2013 5:17 pm

That 30,000 point card was 50,000+10,000 miles a month or so ago. So, you might want to look around or wait for a better deal.

Closed accounts stay on your record for 10 years so it isn't a big issue in my book.
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Re: credit score and 1 year credit card use

Postby jeffyscott » Wed Jun 26, 2013 5:58 pm

I've done 3 of these in a year and the credit score impact was minimal and temporary. Insurance company didn't like it, though, so we switched to a different company and ended up paying less for more coverage.

With 120,000 miles, that came mostly from sign-up bonuses, plus $250 in fees, got two round trip tickets to Europe would have cost us $2500-3000, so the saving of over $2K was worth the minimal credit score blip to us.
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Re: credit score and 1 year credit card use

Postby kwan2 » Thu Jun 27, 2013 12:01 am

hi thx for responses, i always pay off my credit card, so don't need another, other than to get the 30,000 miles, after i get that i would close it,

but just not sure, if there is any downside in opening /closing cards
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Re: credit score and 1 year credit card use

Postby pjstack » Thu Jun 27, 2013 1:56 am

Once you've opened it, why bother closing it at all? Just use it a few (or less) times a year for trivia. There's no problem with having a "spare" in my opinion.
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Re: credit score and 1 year credit card use

Postby vachica » Thu Jun 27, 2013 6:40 am

I've done it twice and the impact was minimal. Also, the CC may be willing to waive the fee on year 2 when you threaten to cancel (happened to me). Check out flyertalk.com for tips, those guys do it all the time. I would consider many of them the opposite of bogleheads though.
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Re: credit score and 1 year credit card use

Postby sesq » Thu Jun 27, 2013 10:46 am

Read flyertalk before you apply. There is a thread or two for every airline card. Make sure you get the best offer. If that is US Air there is 35K offer that is better.

I have applied for 20 credit cards, one mortgage and a car loan in the last 14-15 months. My recent family vaca had flights and hotels paid by points. I have enough points banked for a couple/few more trips like that (domestic or international, albeit in coach).

I see no real difference in my credit in that I am always approved at all the best rates. I am sure the score bounces around.
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Re: credit score and 1 year credit card use

Postby protagonist » Fri Jun 28, 2013 7:39 pm

kwan2 wrote:can someone tell me, if it is worth signing up for a credit card for one year (in this case to get 30,000 miles), if I plan on canceling it in 1 year, and don't plan on taking any loans (credit score) in the near future.

or in general, what the consensus is, or the strategy of grabbing the cc bonus and then canceling in 1 year. etc ; maybe even though i don't plan on a loan, it's not good because of how it does effect one's credit score ?



Yes, without a doubt! You can often find 50K and even 100K promotions. As long as you keep one long-term card (preferably one without an annual fee) and pay off all your balances every month, adding and cancelling cards shouldn't have a huge effect on your credit rating. I have been flying to Europe and to South America every year, basically on promotional mile deals, and have not paid for a flight in probably a decade- plus I have gotten free hotel nights as well. Next month I am flying to Paris for free, with two free nights at the Paris Vendome (rack rate close to $700/night).

The best resource for finding out more, and how to do it intelligently, is probably this one: http://www.flyertalk.com/forum/ There are many others as well that are referenced in that link. There are people who frequent that forum for whom flying free is a hobby, and they amass millions of miles a year. They will share their wisdom with you, much as people generously do here. Flying free is very easy to do, and the effort involved is minimal. I routinely "churn" about 3 or maybe 4 cards/year which is enough for my travel needs....many there take it much more seriously.

Another good site to check regarding the effect that certain actions would have on your credit rating is creditkarma.com. They will give you your credit score for free, and allow you to choose various actions (adding a card, applying for credit, deleting a card, having one overdue balance, etc), and calculate the effect on your score.
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Re: credit score and 1 year credit card use

Postby protagonist » Fri Jun 28, 2013 7:56 pm

pjstack wrote:Once you've opened it, why bother closing it at all? Just use it a few (or less) times a year for trivia. There's no problem with having a "spare" in my opinion.


Most decent frequent flyer cards have annual fees, though they are often (I would say usually) waived for the first year. If you did not cancel cards you do not need, eventually it would get expensive, not to mention confusing.

I keep two cards. One is a Citibank American Airlines VISA card that I have had for well over a decade. Keeping a card for a long time improves your credit score which is partly dependent on the average age of all of your cards. I downgraded that card to one that has no annual fee. Another is the Starwood AMEX card- it has a fee but its fee is lower than the benefits associated with keeping it (if they offer a good new promotion I will occasionally "churn" that one- cancel the personal card and pick up the business card and vice versa). It's a great all-around card with very good benefits. I got a Hyatt VISA card this year that I will probably also keep because every year you get another free night at any Hyatt in the world, and the annual fee is only $75. One night in Paris in the summer at a luxury hotel is way more than worth the renewal fee.

I should add that anybody who has a hard time with credit cards, or has trouble paying off their balances in full each month (that probably means most Americans), should definitely NOT go for frequent flyer miles or try any of these strategies....they will cost you way more in the long run than paying for airline tickets. That is their raison d'etre, and why they have such generous offers.
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Re: credit score and 1 year credit card use

Postby Ged » Fri Jun 28, 2013 8:26 pm

pjstack wrote:Once you've opened it, why bother closing it at all? Just use it a few (or less) times a year for trivia. There's no problem with having a "spare" in my opinion.


I think it's a good idea to have a spare in case one of your cards gets compromised. Happened to me once, and for some unknown reason CitiBank was slow getting a new card to me.
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