Why young(ish) person should be more careful when applying for credit

In my previous posts I heavily focused on credit card deals for a family, and how to leverage them. And for a good reason. We put around 24000 dollars worth of expenses each year on a credit card. That translates into possibly 24000 miles, if using mileage credit card, or 24000 Southwest rapid rewards points.

24000 miles is not even enough for 1 roundtrip ticket around USA or Canada. You may do better with Southwest points, depending on city pairs, but at best it may give you 2 roundtrip tickets. And there are  4  of us , including 2 small kids.

That’s where credit card bonuses come in. As I argued in my  post “Best “keeper” credit cards for family right now”, its usually best to focus on cash back cards for your everyday spending. But occasionally, it pays to apply for a card with 50000 miles bonus or hotel points upfront.

You really get the best bang for your buck that way. I have been using this strategy for a long time. But I really stepped  up this activity last year, and that is how we earned 800k  points in just 12 months .

Honestly, we could have gotten more, but I was rejected for some applications because of my lack of income. So, I had to pay attention to my score and that of my husband’s. The official stance is , that credit score usually goes down about 5 points per application.  In our case, it was more like 10 to 12 points.

In one case it was 25 after just 1 card added, but I suspect, it was because I charged 2000 dollars on it. Most likely it is due to your average age of accounts going down with each new card, affecting your score.

Let’s say, you had just 1 card over 10 years. When you add another credit card, your average age is slashed in half. The more cards you add, the lower your AAoA (average age of accounts) will be. Mine is down to just 4 years, even though my credit history is 15 years old ( I am in my thirties) .

When my mother-in-law applied for 2 credit cards in a row, her credit score did not go down at all. Why? Because she is close to 70, and her AAoA is barely affected by added cards. At least, that’s my theory.

So, when you start playing this game, it’s important to go slow, especially if you are a young or young(ish) person (like myself). I recommend , you sign up for a free account at www.creditkarma.com. I have found it fairly accurate in monitoring changes in your credit, since I bought the real score to compare as well.

This is a very lucrative hobby, but you have to be careful.

Author: Leana

Leana is the founder of Miles For Family. She enjoys beach vacations and visiting her family in Europe. Originally from Belarus, Leana resides in central Florida with her husband and two children.