JimZ wrote:Gordo,
OK, so if you apply for hundreds of credit cards I am trying to understand (1) what impact that would have on your credit rating,
There are a lot
of misconceptions about credit scores. The more credit cards you have, in general, the higher your credit score is going to be. The reason is that as you accumulate more and more available (but unused) credit, your % total utilization gets lower and lower - this is a major factor in your credit score. For the most part companies do not care how many cards you have and that alone is not a factor in determining if they will approve your account. However, many companies limit the number
of cards you can have from them (for example, Citi usually limits you to 4 personal, 2 business. So between you and your spouse you can only have 12 Citi cards).
There are lots
of credit score related things to know
of course. For example, opening any new account TEMPORARILY lowers your credit score by a few points. Too many RECENTLY OPENED accounts IS a factor in approving new applications for cards. This is why everything should be done in waves, and all at once. For example, apply for 20 cards IN THE SAME DAY, and at the beginning
of a week). Your credit score won't get dinged until about a week later. You won't be able to get any more cards from that point for about 3 months, but sooner than that your score will actually be higher than when you started.
Finally, there is the impact
of actually borrowing money (i.e. using the cards). Maxing out all
of your credit lines like I do, can drop your score considerably, and your score will remain lower for the entire duration
of the loan. This is something you have to consider - i.e. if you NEED a high score for some reason (like you know you will be applying for a mortgage) then you obviously do not want to max out your lines like me. My Credit score will go from around 800 to the low 700's or high 600's with lines maxed out. This does not bother me at all. However there are other people that only pull out 50%
of their credit lines (instead
of 95% like I do) and this keeps their total % utilization low enough that their credit score is NOT seriously damaged. So that is always an option. Personally I want to take the score hit for much higher profits. As soon as the loans are paid back, your score skyrockets, and you can do it all over again about a month later. Lets say you had some emergency and had to get your score back up, just brake the CDs and pay off the loans early - not a big deal, you may lose some or all
of the interest, but your score will go back up within a couple weeks.
JimZ wrote:(2) at what point will credit card companies STOP giving you cards (i.e. when they see you have 80 cards already).
I haven't applied for a credit card in a long time, and I know they have been lax, but I am finding it difficult to believe there are that many banks willing to lend after looking at a credit report that lists more cards than "Carter has pills". In fairness, I will disclose I haven't done any research on this (mainly because I don't use credit cards).
God bless you for the cast iron stomach you must have to do something like this. I cant' imagine taking that kind of risk in an environment like this (especially since I have a wife, kids and a house).
Like I said, they don't deny based on number
of existing accounts. A very common mistake people often make is closing accounts for no good reason (they think because they don't use a card anymore, they should close it - this is wrong). I DO close accounts at times, but only when the company insists on it. And if you have to close an account, always close the youngest account, as "age
of accounts" is a factor in your credit score. The older an account is, the better it is for your score.
I know people's eyes BUG out when I tell them I do this stuff, and I understand how some might think this is "risky" but really the only risk is that you are not organized enough to make your monthly min payment and pay the thing back when it needs to be paid back. To me, that is extremely LOW risk. What investment do you know
of with LESS risk? I don't see how having a wife/kids/house makes any difference at all. And your comment about not using credit cards at all also makes me squirm... OK - I understand there are some people who can't handle having a credit card, i.e. they spend more because
of the convenience I guess - so if you are in that boat, I understand, and you definitely don't want to play the credit card game. For everyone else - it makes sense to put absolutely EVERYTHING YOU POSSIBLY CAN on a credit card. Citi has/had a "cash returns" card that gives 5% cash back on every purchase - I put my taxes even on this card (people are doing this for hundreds
of thousands
of dollars) using officialpayments.com for a 2.5% total reduction in my taxes, I put every bill and expense I can on this card. You can even buy CASH with this card via the
US Mint direct ship program - you get 5%
of your total (up to $7000) in free money. Sure the bank teller is not going to be happy when you hand her 50 lbs
of dollar coins, but hey its the easiest $350 you will ever earn. You can get a 15 cent a gallon discount on your gas by using a card that gives 5% cash back on gas (there are several
of them out there), there are also cards that give 5% cash back on grocery purchases which my family has been using for years. Plus you get to delay the outflow
of funds by a month even when you pay your balance in full, so you make money on interest.
Credit cards have made me tens
of thousands
of dollars. But obviously someone that has had a history
of not being able to pay their balance in full is probably not going to have a net benefit from using credit cards. To me this comes down to basic economics - I never understood why people buy things they cannot afford. I'm a frugal living "nut" with extremely low recurring monthly expenses. I can very easily live quite happily on 15k a year. If I lost every dime I had in savings, and my job, I'd still be OK. I heat my house for free (high efficiency woodstove), do not have cable/satellite TV (free digital & high definition broadcast TV is wonderful by the way, only 4 months before they shut down analog), my cellphone costs $8/month, home phone is internet service ($10/month for unlimited calling), I use the internet to make a steady stream
of residual income so it pays for itself and my electric bill, and I grow lots
of food and sell some
of it for additional income and a property tax break (many states have a program like this, but few people know about it).