How churning affects your credit score
There are a few factors that that go into calculating a credit score. Some churning activity will hurt your credit score but the benefits generally outweigh the costs.
Autopay your credit cards bills
If you carry a balance on any cards or do not have autopay set up for your credit cards, churning is probably not for you. Missed payments have a negative effect on your credit report.
How churning hurts your credit score
When you apply for a new credit card, the issuer does a hard pull of your credit report which will show on (one of your) credit reports*. These stay on your report for 2 years. The good news is a new hard pull only lowers your score by about 7 points and this dip only lasts about a month.
Your average age of accounts will go down (lower is worse) as you open new personal credit cards, which is unavoidable. Business cards do not show on your personal credit report so they do not factor into your average age of accounts.
How churning helps your credit score
As you open more personal credit cards, your total available credit will go up, which lowers your credit card utilization (the percentage of your available credit you’re using). This is the biggest factor of your credit score which will likely outweigh the lower average age of accounts.
Since business cards do not show on your personal credit report, they do not add to your total available credit but they do lower utilization because any spend on the business card doesn’t show on your personal report, lowering utilization.
The Credit Karma app will show you your credit score (TransUnion and Equifax) for free. American Express, Bank of America, or Discover will show you your FICO score.
If you want to boost your credit score, try paying your personal credit card bills early. This will lower your utilization the next time the issuer reports to the credit bureau. Or you could try out the secure loan trick if you’re looking for something more involved with a bigger positive impact.
Personally, churning has had a net positive impact on my credit score, so while it’s something you should keep an eye on, most people don’t have to worry about churning significantly lowering their credit score.
*Which credit report is pulled when you apply for a credit card varies by state and issuer.
