I’ve opened more than a dozen credit cards and figured out exactly how opening a card for the bonus affects my credit

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New credit cards temporarily lower your credit score, but using them responsibly can raise your credit score in the long run.
Sign-up and welcome bonuses can be a good incentive to open a card, but otherwise a card you open for a points or miles bonus behaves the same as any other card.
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Reading Chris Guillebeau’s popular blog, The Art of Non-Conformity, I found that signing up for credit cards and earning bonuses is a quick path to free and discounted travel.

But as a former bank manager, I knew there would be costs on my credit report if I went on a card-opening spree.

I got my first card specifically for rewards. It was a British Airways Visa Signature Card, and I took home a huge bonus (no longer offered) worth enough for a trip to London, Paris, and Amsterdam. In the years since, I’ve opened more than a dozen credit cards and added quite a few lines to my credit report.

Over time, I’ve found opening cards for the welcome bonuses helps — not hurts — my credit. But that’s because I’ve kept my balances low, made my payments on time, and avoided borrowing more money than I can repay.

The welcome bonus can be a good reason to choose a card in the first place, but ultimately any card you open should be used responsibly.

What happens to your credit when you apply for a new credit card

When you apply for any new credit account, the lender will want to know your credit score and credit history. In most cases, that involves a “hard pull” on your credit.

A hard credit inquiry shows up on your credit report for two years. It is visible to other lenders when applying for new credit during that two-year period and slightly lowers your credit score until it drops off. In my experience, a typical credit inquiry costs me around three to six points from my credit score. (Remember, the best possible credit score is 850.)

Read More: After years of experimenting, I’ve figured out exactly what opening and closing credit cards does to your credit

Free credit score website Credit Karma offers a cool credit-score simulator that can help you estimate what an inquiry and new card would do to your own credit.

If you apply for a bunch of credit cards in a row, the impact to your score will add up. Lenders will also see this trend as a risk and are more likely to turn you down for new credit. But if you space things out enough, the effect of an inquiry on your credit score isn’t a very big deal as long as you have good or better credit.

If you …read more

Source:: Business Insider – Finance

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