Will applying for rewards cards hurt your credit score?

Ever see the reward cards that advertise thousands of travel miles for just opening an account?  I recently got the Capital One Venture Card and was wondering how my credit score would be affected if I applied for several of these cards.

The post below is by RJ Weis at Gen Y Wealth.  He applied for several cards and tested the impact on his credit score.  What do you think happened?  The results were surprising! Read below:

The Impact of Travel Hacking on Your Credit Score

by RJ on May 15, 2011

The last time I checked my credit score, it was at 717. That was on June 12, 2010.

Since then, I have applied for 4 different credit cards. The purpose for applying to each of these cards was to earn free miles.

The four cards I applied four earned me 200,000 miles. That’s good for 4 round trip tickets to many international destinations.

So how did this impact my credit score?

Let’s find out.

Last time I checked my credit score, I did so using MyFico. Now it costs $20 to get a credit score at MyFico, so instead I’m using Equifax. You can view your FICO® score through Equifax for $15.95.

I’m happy to report that my credit score as of 5/13/2011 is 752. An actual increase!

Why did it go up? I can think of a few reasons.

  1. I only had one credit card before, so more credit cards improved my utilization rate.
  2. I paid all of my bills on time.
  3. I didn’t apply for many credit cards all at once. Although, I’m not entirely sure if this helps or not.

One of the biggest assumptions about travel hacking is the negative impact on your credit score. Everyone’s credit situation is different and nobody knows exactly what goes into this calculation. However, my point is that you should always test assumptions. Many times, they’re incorrect.

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