How Credit Card Churning Can Affect Your Credit Score

While lucrative, credit card churning isn't without risks to your financial health. The process can impact your credit score in several distinct stages, from the initial application to account closure.

1. Hard Inquiries from Applications: Every time you apply for a new credit card, the issuer performs a hard inquiry on your credit report. Each inquiry can temporarily dip your score by a few points, and multiple inquiries in a short time can signal risk.
2. Impact on Credit History and Utilization: A new account lowers the average age of your credit history, which can negatively affect your score. On the plus side, it increases your total available credit, potentially lowering your credit utilization ratio—a key scoring factor.
3. The Risk of Closing Accounts: After you’ve earned the sign-up bonus, closing the card can be detrimental. It reduces your total available credit, which can cause your utilization ratio to spike, and it can further impact your credit history's age.
4. Increased Management Complexity: Juggling multiple cards, payment due dates, and annual fees increases the chance of a misstep. A single late payment can significantly damage your credit score and stay on your report for years.

How Much Will Credit Card Churning Affect Your Credit Score?

The exact impact of credit card churning on your credit score depends on several key factors. Here are a few things to consider:

• Hard Inquiries: Each new card application triggers a hard inquiry on your credit report. While one inquiry has a minor impact, multiple inquiries in a short period can lower your score more significantly.
• Credit Utilization Ratio: Opening new cards increases your total available credit, which can lower your credit utilization ratio. A lower utilization rate is generally favorable and can positively influence your credit score.
• Average Age of Accounts: Each new account you open reduces the average age of your credit history. A shorter credit history can be a negative factor for your score, as lenders prefer a longer track record.

How You Can Avoid Credit Card Churning Affecting Your Credit Score

Space Out Your Applications

Applying for many cards quickly triggers multiple hard inquiries, which can lower your credit score. By pacing your applications over several months, you give your score time to recover from each inquiry and show lenders you're not desperately seeking credit, maintaining a healthier profile.

Keep Old Accounts Open

Closing credit cards, especially older ones, can harm your score by reducing your average account age and increasing your credit utilization ratio. It's often better to keep no-annual-fee cards open, even if unused, to preserve your credit history length and available credit.

Pay Balances in Full

Meeting minimum spend requirements can lead to high balances. To protect your score, always pay these balances in full before the due date. This keeps your credit utilization low—a major factor in credit scoring—and demonstrates responsible management to creditors, avoiding negative marks.

Ways to Improve Your Credit Score

No matter your current standing, improving your credit score is always possible and achievable through consistent, positive financial habits. With dedicated effort, you can typically see meaningful changes within three to six months.

• Monitor your credit reports. Regularly check your reports from Experian, TransUnion, and Equifax for any inaccuracies that could be dragging your score down and dispute them immediately.
• Set up automatic payments. Your payment history is the single most important factor, so setting up automatic transfers for your due dates ensures you never miss one.
• Lower your credit utilization ratio. Aim to use less than 30% of your available credit, as high balances can signal financial distress to lenders.
• Become an authorized user. You can get a boost by being added to the credit card of someone with a long history of on-time payments and low credit utilization.
• Diversify your credit mix. Lenders like to see that you can responsibly manage different types of credit, such as a mix of credit cards and installment loans.
• Limit hard inquiries. Applying for too much new credit at once can temporarily lower your score, so space out your applications and use prequalification tools when possible.

The Bottom Line

Credit card churning can offer significant rewards, but the frequent applications and account closures can temporarily lower your credit score due to hard inquiries and a reduced average account age.

Frequently Asked Questions

How do hard inquiries from new cards affect my credit score?

Each application creates a hard inquiry, causing a small, temporary dip in your score. Too many inquiries in a short period can have a greater negative effect.

Does closing credit cards hurt my credit score?

Yes, closing cards can increase your credit utilization ratio and lower the average age of your accounts, both of which can negatively impact your credit score.

Can churning improve my credit score in the long run?

It can. By increasing your total available credit, you lower your utilization ratio. On-time payments on new cards also build a positive payment history over time.