(Not Exactly) The Price of Credit Card Arbitrage: Marching toward 800

The last time that I checked my credit score was in February when I almost didn’t have any borrowed money from credit cards. When I saw my FICO score from Experian at 769, it was really a pleasant surprise because it was the highest score I have ever had.

Since then, I have done quite a few things that could damage my credit score, at least temporarily, including:

• Got two more credit cards (Citi PremierPass and Chase Freedom);
• Racked up nearly $100,000 in credit card balance from credit card arbitrage.

From what I have heard, these activities, opening too many cards in a short period of time and carrying very high balance, could have very negative impact on credit scores. But how bad could be it? The last time when I also used more than 30% of my overall credit limit, my credit score was 699. Now, the utilization ratio is nearly at 50%. Could it be even below 699 that I got more than a year ago?

With these questions, as well as the one that I asked regarding credit limit reallocation, I purchased another FICO score from Experian (I always buy Experian FICO score so I can compare the changes) last night and

Not only that the score didn’t drop as I expected, it actually added nearly 20 points in 6 months! Surprise, surprise, surprise.

To make sure that this score reflected the activities I mentioned above, I checked the total balance of my accounts, which showed indeed that I have nearly $100K balance as of now. According to myFICO, the amount owed should account for 30% of the credit score, but it doesn’t seem to have too much negative impact in my case, comparing to what I had half a year ago. Of course, there’s always the possibility that my score could be even higher (maybe over 800) if there were no such a large balance. From what I saw the only negative item on the credit report is that I have too many credit accounts with balance (7 out of 41).

I have heard lots of talks on credit cards and credit score against having too many cards, opening multiple accounts in a short period of time, or carrying a high balance. While the advices are valid in general, it doesn’t appear I am being punished for doing exactly that. Could it be that the negative impacts of these activities are overstated? I don’t know, but it’s possible from my experience. My credit history isn’t very long (less than ten years, but still quite long to get where I am now), and I own 41 credit accounts (including those closed). That’s an average of more than 4 cards ever year. Even now I am still on the look out for good deals to make a few bucks.

Looking back the past decade, the only thing I did that contributes significantly to my current credit score is I never had a single late payment. I always pay in full every month, no matter how big the balances are, while trying to charge everything with credit cards. So far I haven’t got into a situation that I had to charge on credit cards, but couldn’t pay it back. For whatever I charge on the plastics, I make sure I have the ability to it in full on time.

After all, what I feel is when creditors evaluate my credit-worthiness, their main focus will be on my payment history, not the number of accounts I have. I can have dozens of cards (and I do), but as long as I pay each and every card on time, I don’t necessarily pose higher risk than people have only a couple of cards.

BTW, for the credit limit reallocation question, I don’t think it’s an issue. On one Chase card, I have a credit limit of only $500 after moving the line to the Freedom card and the highest balance of $11,000. But no negative record.

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