“Credit card churning” is a popular strategy to earn serious frequent flyer points for minimal outlay. Many credit cards offer sign-up bonuses, ranging anywhere from 5,000 to 100,000 points, just for getting the card.
The idea of “churning” is to take advantage of these credit card sign-up bonus deals. Each new credit card comes with a handy stash of frequent flyer points. So the strategy is to continuously apply for new cards. Once the points have credited, you can cancel the card and move on to the next one.
It sounds good in theory, but there’s an important catch… Every time you apply for a new credit card – even if you are not “credit card churning” and the application is rejected – your credit score takes a hit. If your credit rating is damaged, this can cause serious problems down the track. For example, you may be unable to obtain finance for a mortgage.
With this in mind, it’s imperative to not get too carried away. Thankfully, there are ways to keep track of your credit rating and ensure it remains at a respectably high level.
Our member rock86 recently applied for two new credit cards, and noticed their credit rating drop slightly. They have since paid all bills on time – something which is vital if you wish to maintain a good rating (and avoid paying interest!). But they have not noticed any subsequent changes to their credit score.
In this time I have made all repayments on my home loan, bills etc. paid CC’s fully however no change to my score whatsoever. There’s no issue with my score (it’s around the 840 mark) but I just thought for sure it would start creeping back up since I’ve been been meeting all my credit obligations.
Our members believe this may be because rock86 already has a high rating. (With credit ratings, the higher the better.) Another member notes that it takes years, not months, for responsible behaviour to impact your credit score.
Given this is a new criteria (IE. positive behaviour) I can’t say for certain, but I think you are talking years rather than months for this type of positive behaviour to have an impact.
Everyone’s experience is slightly different. The algorithms that determine your credit score are not publicly released so they’re a bit of a grey area. There are some activities that generally impact your score negatively. These include making multiple credit applications in a short time frame, not repaying debt on time, and moving house regularly. But your score should gradually improve if you pay display positive behaviour, such as paying off all debt on time.
If you want to check your credit rating, one way is to apply for a free credit check report from Equifax. Equifax also offers a free “personal credit repair” service.
Due to cc churning, I get Veda [now Equifax] updates re my changed score but when logging the score has hardly changed from ~ 610, so I press on with the applications.
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