Cash is King, Right?
Savvy consumers knows that credit is king (not cash), especially in the US. I wake up each morning thankful that I live in the States and am eligible for the massive signup bonuses that credit card issuers release only in the US market. Find yourself living in another country and you will wish you had a US-based address with good US-credit.
Examples of Big Sign-up Bonuses
Check out my Top 5 List I published in earlier this month – what I consider to be the best credit card signups for the month. Shortly after publishing, the 50k Amex PRG Offer was resurrected again. And of course, my all-time favorite for getting 3 free first class one-way domestic flights on United: Barclays Lufthansa Miles & More 50k Signup. I recently applied again after having cancelled the same card 8 months ago and Barclays approved my application / confirmed the 50k signup bonus.
Be on the lookout this upcoming week for my Top 5 List for August.
Credit Card Application Strategies
Aggressive – The App-o-rama is an extremely popular strategy for scoring the most points and miles in the shortest amount of time. It makes sense – apply for credit cards across different issuers all on the same day so each bank does not see the hard pull / new account opening until the next day (or few days). Once the credit bureaus see the hard hits / new accounts kicking in, the credit scores plummet temporarily. Someone going for this strategy may only do App-o-ramas 3x a year, leaving enough time lapse for the credit score to jump back up before performing another App-o-rama.
Conservative – On the other end of the spectrum, you have the conservative consumers who may only apply for a few credit cards each year. In their eyes, they don’t want to deal with the hassle of managing “so many” cards or remembering to cancel 1 year later for those with annual fees. See related: Credit Cards Worth Paying the Annual Fee
Just Right – The strategy that works best for me is the mini-App-o-rama. Instead of banging in 7+ credit card applications in 1 day, I sometimes apply for 3-4 on the same day. My rationale is that each card has a minimum spend that’s required to earn the signup bonus (typically $1,000 – $10,000 spend within first 3 months, depending on the offer) which I can handle within a 3 month period.
Occasionally, I fall short on the minimum spend requirement and use manufactured spending strategies. Sometimes there are fees to do this like a 3% transaction fee but $30 – $60 is a small fee to pay for tens of thousands of bonus points/miles.
Where Do Credit Scores Come into Play?
Credit is the most important factor for credit card approvals. Currently, there are 3 credit bureaus: Equifax, Experian, TransUnion. Each bureau issues its own FICO score which ranges up to 850. Prime, in credit score terms, is considered 740+. That means that creditors will generally offer the best (lowest) rates if your median credit score is above 740. There are exceptions, such as HSBC, who will offer prime rates on Premier Deluxe Mortgage packages with a median score of 760+.
Free Credit Scores for All 3 Credit Bureaus – Equifax, Experian, TransUnion
There are a handful of sites that offer free credit scores and I only recommend the 2 sites below. Between these two sites, you will be able to see your credit score across all 3 credit bureaus:
- CreditKarma – provides free scores for TransUnion and Equifax, updates scores once every 7 days. Provides virtual TransUnion and Equifax credit reports (not just score) showing the main factors that impact your score.
- Credit.com – provides free credit score for Experian, updates score once every 30 days. Provides a virtual Experian credit report (not just score) showing the main factors that impact your score.
Generally speaking, Equifax and Experian are pulled the most by card issuers, with TransUnion being the C-class prostitute that most ignore. Looking at my history, Barclays is the only bank that has performed hard pulls on my TransUnion report, although this differs by bank and by state. Capital One is the only bank that will pull all 3 credit bureaus.
If you find an error on any of your virtual credit reports, you will need to correct the error directly with the credit bureaus. The best way is to request your free annual credit reports for all 3 bureaus. Once each credit report is generated, there will be options for you to dispute inaccuracies.
Using CreditKarma and Credit.com before Applying for Credit Cards
My approach – right before a mini-App-o-rama, I refresh my credit scores on CreditKarma and Credit.com. Although not necessary, I make sure that all 3 scores are 740+ to have the best chances of approval. I also check the virtual credit reports to get a sense which bank pulls from which credit bureau. In my case, I almost always include a Barclays-issued credit card, since no other banks pull from my TransUnion report.
To date, I have only been denied 1 credit card – the Chase Ink Plus in late 2013. I eventually got the card several months later but my original rejection was due to “too many new accounts in past 12 month period” of which 2 were new Chase accounts. No one likes rejection and for that reason, I only include Chase in every other mini-App-o-rama.
How Accurate Are the CreditKarma and Credit.com Scores?
I generally find the scores produced by CreditKarma and Credit.com to be fairly accurate +/- 10pts. So far, my true FICO scores ends up being higher than what's reported on CreditKarma and Credit.com. This is good since I usually target 740+ and would much rather be positively surprised than to hear from my mortgage broker that I didn't qualify for the prime rate on my refi.
As a reference, I have closed / refinanced my home a total of 4x within the past 2 years – each event required a hard pull from all 3 credit bureaus and I was able to compare the scores produced by CreditKarma and Credit.com vs. my true FICO scores as reported by Equifax, Experian, and TransUnion.
What Cards Did I Apply for Recently and How Do My Credit Scores Look Now
My most recent mini-App-o-rama occurred last week and included the Barclays Lufthansa Miles & More 50k Signup, Amex Delta Biz 60k Signup, and the Citi AA Personal MasterCard. My credit scores today: 773 (TransUnion & Equifax) and 757 (Experian):
While the hard hits generally decrease credit scores, the new accounts increase my total line of credit, reducing my credit utilization and ultimately increasing my credit score. It doesn't always work this way: the law of diminishing returns eventually kicks in when your credit line is high enough where the positive effect of another $10,000 in new credit is not enough to offset the negative effect of the hard hits / new accounts in a short amount of period.
For those keeping track, yes, these credit scores reflect:
- 4 hard hits from my mortgage broker in the past 2 years of which 2 are within the past year – all 3 credit bureaus were pulled each time
- 6 mini-App-o-ramas in the past 2 years of which 3 are within the past year (and 1 last week) – credit bureau pulled determined by bank and state of applicant
Feel free to share in the comments below:
- Do you also refresh CreditKarma and Credit.com right before applying for credit cards?
- Are you more conservative, aggressive, or somewhere in the middle when it comes to credit card applications?
- Are there any other free credit score sites that you prefer over CreditKarma and Credit.com?