There are many blogs and sites that discuss the impact of obtaining multiple credit cards on your credit score. They largely focus around the simple concept of what happens to your credit score when you have an inquiry, and how that lowers your score a little but then that score dip recovers shortly after and you are back to normal. And that largely makes sense if you get a couple of new credit cards from time to time. But those of you that know me know that I tend to be a little more hardcore about this hobby than average. Whenever someone asks me which one credit card they should get for this game I always answer “never get one, get them ALL”!
Anyway over the past twelve months, for reasons way beyond the scope of this post, I have obtained four different mortgages and attempted to obtain a couple of auto finance deals. I figured it would be worth sharing my experiences here as some of them shed a light on the impact of obtaining multiple credit cards on your ability to obtain other forms of credit.
Impact on Mortgage Applications
I have obtained four mortgages in the past twelve months. One was a refinancing of an existing mortgage where I was paying down the balance (i.e. my new borrowing was lower than my prior borrowing), the other three were for new properties. I was approved for all four.
In each application I ended up having to provide an explanation letter – not about the new accounts, but about the new inquiries. This seemed odd to me but hey I am not the one doing the underwriting (personally I would be more interested in actual accounts opened and credit obtained than requests for credit).
For each inquiry I simply had to provide a simple explanation along with a statement of whether new credit was obtained. In most cases I simply stated “Rewards credit card” and that new credit was obtained.
You can click here to see a redacted copy of one of these letters of explanation. I never had any follow up inquiry after this and the mortgages were all approved.
Impact on Auto Loan
In addition to the mortgages I have had a variety of auto loans or auto leases over the past several years. I have never had the large number of inquiries or accounts on my credit report even come up as a question let alone an issue on any of these until my most recent attempt at getting a cash-out auto loan from PNC. It may be down to a cash-out financing being viewed as more risky (I was essentially looking to borrow money using my wholly-owned and unencumbered vehicle as collateral) or that PNC is just a more risk averse lender (I suspect the latter), but I was ultimately declined for this loan application. This is despite having a long stand and strong banking relationship with PNC and having the local branch manager appeal the decision. The denial letter was highly comical:
I particularly enjoyed the colorful language of my apparent “pyarmiding of indebtedness” – using pyramid as a verb is certainly a new one to me. Thanks PNC! On the back of the same letter was details of the credit report used and as you can see there was certainly no issue with my credit score:
At the time of applying I also had approximately five times the amount of my loan request in cash in my checking account, so even with that 792 credit score, no recurring debt, a history of on time payments and so on I was still consider one pyramid of debt too much for their taste.
In general I have been quite aggressive in pursuing credit card deals and churning credit cards to earn miles, and over the years it has had very little impact on my ability to obtain credit including very large home and auto financing. However my clean run has come to an end and the lesson for me is that there will be certain lenders who just do not feel comfortable with the kind of actions we engage in and their impact on our credit reporting. Hopefully these real insights will help you make a better decision as to whether or not you continue to engage in this kind of credit card churning when you are seeking more significant financial borrowings.
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