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Easy Guide to Applying for a New Credit Card

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Summary

  • Make a habit of taking advantage of your annual free credit check.
  • Wait at least a year from a hard credit pull like applying for a mortgage and three months from a credit card application.
  • Take advantage of credit card promotions out there, keeping in mind rules from specific credit card companies.

Intro

I used to get my annual free credit check every year after I learned about it a few years after I started working. I don’t think I’ve gotten one in a while, and I thought it would inform me about how I could maximize the credit card sign up promotions that I have been getting bombarded about from different newsletters and advertisements.

1. Free Credit Check

Annual Credit Report.com – Home Page

I inputted all my information and was prompted with a question of whether I want the reports spread out over time, so I decided to just opt for the TransUnion report instead of all three. My plan is to save the other reports for later in the year if I wanted to get another credit card advertising an attractive rate.

I didn’t notice any unusual activities or any information that was different from my understanding of accounts or credit checks.

For my wife, I also did not notice any inconsistencies and confirmed that it hasn’t been a full year since her last hard credit pull.

The credit report was a reminder that it hadn’t been a full two years since my last hard credit check. Previously, I had had a rough idea of how to manage my credit and how credit pulls can affect my score but never formally documented my findings, which subsequently led to my fading knowledge on the topic. Hence, I started going down the rabbit hole 🐇 of creating a system/manual for managing my credit and maximizing credit card bonuses 👨🏼‍💻.

2. Refresher on Credit Score

Guide to Credit Scores and Credit Score Ranges – NerdWallet

Most important parameters are on-time payment (missed payments will be costly, I can personally attest), credit utilization (maintain <30% utilization for all individual accounts and overall credit), amount of credit (higher allowed credit is better).

Also, I know that the number of hard credit pulls (e.g. mortgage application) can impact scores significantly.

What Is a Hard Inquiry? – NerdWallet

Hard credit check/pull is one that requires your consent and includes those required when applying for a mortgage, credit card, auto loan, student loan, or personal loan (does not include pre-qualifying for a loan).

How Long Do Hard Inquiries Stay on Your Credit Report? – NerdWallet

A hard inquiry will stay on your report for about 2 year and stops affecting your credit score in under a year.

How Long Should I Wait Between Credit Card Applications? | Bankrate

  • Rule of thumb is to wait >90 days before new credit card applications and full 6 months to be conservative.
  • 10% of FICO score is based on how much new credit you have.
  • Amex limits each cardholder to under 5 credit cards and limits to 2 applications in 90 days.
  • Chase has a 5/24 rule – won’t accept more than 5 new credit cards in the past 24 months.
    • Welcome offers are limited to people who do not have the card or have not received a new cardmember bonus in the past 24 months (48 months for Sapphire cards).
    • Best practice is to cancel or downgrade a card before reapplying for it.
    • 24 month waiting period starts when you receive the bonus.
  • Capital One allows one new card every 6 months and allows up to 2 credit cards at any time.
    • Can get multiple sign-up bonuses on the same card but need to be spaced out 48 months in some cases (Capital One Venture).
  • Discover – just one new card per year.
  • Citi – one every eight days and can’t apply for more than 2 in 65 days.

My conclusion from this research is that I should wait at least a year from my last hard credit inquiry and at least two years to be really conservative in order to protect my credit score.

Since I was close to the two-year mark since my last hard credit pull, my conclusion was that it’s probably pretty safe to take advantage of an attractive credit card promotion but that I shouldn’t be super aggressive with it.

3. Review Credit Card Offers

I am not shopping for a credit card for my wife and only for myself, given the hard credit pulls mentioned in the above section.

Through the discovery process, I also discovered that my options are really the following.

  • Amex – maxed out and not eligible unless I cancel a card.
  • Chase – I could downgrade my reserve and apply for Reserve again.
  • Discover, Capital One, Citi were all fair game since I don’t have any of their cards.

Best Credit Cards – February 2024 – NerdWallet

  • Chase – Freedom Flex (but I probably won’t get the intro offer) and Sapphire Preferred were options to downgrade to. Also the World of Hyatt credit card had an attractive bonus.
  • Capital One – Capital One SavorOne Cash Rewards looked like a good option.
  • Discover and Citi – I didn’t see any attractive offers in February 2024

Best Credit Cards of February 2024 – The Points Guy

I personally knew that SoFi had a credit card offer for 2% cash back (3% if you are a SoFi Plus member for up to a year) for across all categories (except travel which is 3% by default) with no spending requirements. Since I found SoFi a good financial super app for my personal use, I was interested in opening up a credit card as well.

Even though all the credit card promotions that offered points in exchange for spending requirements looked attractive, I did not have enough time to calculate how much value I would be getting in exchange for the spending. In other words, none of the offers at the time of my writing was a slam dunk, without me having to do some time-consuming calculations.

By contrast, the SoFi offer essentially gave me a 0.75% bump in all-other spending categories because I use my Chase Freedom Unlimited (offers 1.5% on all other purchases) for non-bonus categories and at least get 50% more value by using Chase points to book travel (1.5% x 150% = 2.25%). I thought this was a no brainer until I figured out a system to value credit card points and sign-up bonuses in a way that works for me.

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