Credit Card Churning: Not a Game to Play While House Hunting

Dear Cashing In,

My husband and I would like to take advantage of some awesome sign-up bonuses that we don't think will last. Problem is, we're house hunting and there's a chance we'll be applying for a mortgage within the next year. This means we'll be house poor, so we'd love to have a pile of miles and points stashed away for future travel. Someone told my husband if he applies to two or three cards on the same day, it counts as one hard pull on his credit and won't show up on his score. Is this true?

- Joanne

Dear Joanne,

If you apply for more than one credit card, even within the same day, your score will indeed take a dip, at least in the short term. Issuers generally will do a hard pull on your credit report for each card you apply for.

What your husband's friend may have been referring to is the practice of applying for multiple cards on the same day in order to "churn" sign-up bonuses. The idea behind that is not to avoid the temporary (but inevitable) credit score impact but to avoid having other card issuers see the lowered score when applying for their cards. Because you're applying for the cards all at once, the theory goes, all issuers will see your current (pre-dinged) credit score, thus raising your chances of acceptance by all cards at once.

Your score will be impacted by applying for multiple cards on the same day via this strategy, but it may not happen until you have your new cards in hand and bonus miles accrued or beginning to accrue. Scores will usually bounce back after a few months, assuming you continue to pay your bills on time and don't do anything else to negatively affect your credit history.

However, this is a risky game, especially if you're in the market for a mortgage. Frequent flier blogs and chat boards are full of stories about churning cards for bonus rewards. Obviously, to do this successfully you have to start with a strong credit score or you won't be accepted for the cards in the first place. (Many frequent fliers do get turned down initially but make their case by calling the card's reconsideration line.)

Some miles bloggers apply a 91-day-wait between applications, claiming a full business quarter is enough to see their scores bounce back. Others are more conservative with their wait time. Personally, I wouldn't risk doing this every three months and I wouldn't apply for any card within six months of applying for a mortgage. If you and your husband find your dream house two months from now, you're going to want your combined credit to be shipshape.

Another potential problem is that most reward cards require a minimum amount of spending within a specified period in order to qualify for the bonus. This can be tricky even with only one new card, so you should have a plan in place for how you're going to hit that minimum spend.

Let's say you've already been approved for your mortgage and decide to apply for three cards at once. If one card requires spending $10,000 in the first three months, another $5,000, and a third $10,000 in six months -- you're now locked into spending $15,000 in the next three months and another $10,000 in the following three months. Do you have $25,000 to spend in half a year?

Apply for those cards and fall short of the spending limits on sign-up bonuses and you pretty much defeat the purpose of churning. You just played roulette with your credit score for nothing, on top of which you may be locked out of reapplying for that card and bonus again.

Remember, too, that on top of wanting a pristine credit rating for both you and your spouse, you'll have to scrape together cash for closing costs and down payment on your new house. It's not the ideal time to be cleaning out the coffers just to score some rewards.

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