Opening Credits

Great credit score means you should reap rewards


The longer you’ve used credit successfully, the less harm you’ll do by getting some new cards, and big sign-up bonuses make it worthwhile

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QuestionDear Opening Credits,
I have a credit score of 841. I’m thinking of opening three new accounts over the next 12 months that offer major rewards, i.e., 50,000 miles/point after spending $3,000 in three months. Would such a move lower my overall credit score? Each card would be paid in full each month. — Larry


Dear Larry,
That’s quite a score you have there! At just a few points shy of sheer perfection — assuming it is the FICO score, which tops out at 850 — I can see why you’d want to preserve it. I also want you to focus on getting what you want out of it. You’ve worked hard to earn such a high score and it’s time you literally reaped some rewards!

Opening three new accounts, each bearing extraordinary sign-up rewards points, can be financially fantastic. It’s like alchemy. As long as you spend the combined $9,000 in the initial months of ownership, 150,000 points will be yours to transform into gold. Well, maybe not precious metal, but definitely into cash, products, gift cards or valuable travel perks. Since you intend to repay every penny you charge, you would come out ahead even if there are modest annual fees associated with the accounts.

But as you know, all actions you take regarding credit products have a direct effect on your consumer credit reports and are factored into your scores. It begins with applying for the account and then continues with the way you use the card.

Payment history is the most significant FICO scoring factor (at 35 percent); next is your credit utilization ratio: the amount of debt you carry compared to your credit limits (30 percent). With scores as high as yours, you must have been consistently using your cards and paying on time and in full for years. Because you plan on treating these new accounts as responsibly in the future as you have in the past, these two key factors will remain as awesome as ever.

So what will getting three new cards do? Well, the applications may cause a little digit dip, but since new credit inquiries (at 10 percent) are such a minor scoring factor, your score should quickly rebound.

Opening new card accounts will shorten your average credit account age (or length of credit history), which accounts for 15 percent of your score. Types of credit in use, or credit mix, accounts for the remaining 10 percent. It is impossible to predict exactly how much adding new card accounts will impact an individual’s credit score, since everyone’s credit history and usage is unique. But with digits in the 800s, I wouldn’t worry too much unless you’re going to be shopping for a major loan, such as a mortgage, in the next year or so. And since you have proved that you can charge with a variety of credit instruments in a positive fashion, your scores should bounce back just fine.

All in all, if you stick to your tried-and-true method of charging and repaying, your credit rating will stay impressive and you’ll reap some fabulous freebies. I say go for it.

See related: How average credit account age affects your FICO score,  The five factors of a credit score


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