Rewards Credit Cards and a Mortgage Refinance

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I’ve mentioned a couple times that I haven’t been applying for any rewards cards recently (some of which I’m drooling over) because I am in the middle of a home refinance.  That process is now praise-the-lord-hallelujah finally complete, so I wanted to talk a little about how it went as it relates to rewards credit cards.  Though I’m sure this all goes without saying, this is of course just my story and not necessarily what would happen for any other refinance situation.  I’m not a mortgage or finance expert, just a rewards card junkie who successfully refinanced their house at a low interest rate.

Applying for a Refinance With Multiple Credit Inquiries:

We knew that we were likely going to refinance our house to pay it down and get a shorter term, so I purposefully laid low on applying for many credit cards the 3-6 months before we planned to go for the refinance.  This was actually very easy as my husband was taking the lead on applications due to his bankruptcy freshly aging off his credit report last year.  We didn’t go crazy with his applications either, especially in the 90 days or so before we went for a refinance, however we also didn’t stop getting cards completely on his end.

In the last two years I had about 8 inquiries on my credit report with Experian, 3 with TransUnion, and 8 with Equifax.  I honestly thought I had a bit more than that, but some must have aged off the report pretty recently (they fall off after two years).  Most of those inquiries were from obtaining rewards credit cards over the last couple of years, but all of them were more than 3-6 months old.

I’m not sure of the exact number of inquiries on my husband’s credit report off hand, but his number of inquiries were likely a lower than mine.  However, he did have about 5 inquiries in the 6-7 months before we applied to refinance.  Two of those were in the three months before the refinance.  That isn’t necessarily the smartest move in the world, but it didn’t end up hurting anything.

Recent Inquiries Mattered the Most:

Even though we were refinancing the home we lived in, while simultaneously paying down the amount we owed, it was still a brutal process to get approved for the refinance.  I honestly thought I was going to have to give some sort of DNA sample, brain scan, or similar at some point as the amount of info they needed was so substantial.  However, one thing they didn’t seem to care about were most of our credit inquiries.  The only ones they asked about were two on my husband’s account that happened in the 90 days before we applied to refinance.

For those we just had to state what they were and give a copy of the most recent credit card statement for each of those two.  For us credit inquiries were virtually a non-issue in the refinance process.

Number of Open Credit Cards:

Between us we probably have about 20 open credit card accounts right now, but that also was not at all an issue that they seemed concerned about.  The only thing that came up related to all of these open accounts is trying to match up what we labeled each account in our online bill payments so they could line it up with each open account on our credit report.  Some of the names we had for our cards in our online bill payments (that then printed as that name on our checking account statement) were very old names for cards that had changed over the years (like Continental World MasterCard that is now our United Club Card).  That discrepancy caused some confusion for the mortgage folks, but it wasn’t that hard to clear up.

Credit Score:

We were told by the mortgage folks that in order to qualify for the highest tier of interest rates with them that our credit scores had to be 740+, and they both were.  That was great news as it meant that the dips our scores might have taken thanks to getting rewards credit cards didn’t cost us anything in terms of being in the highest credit tier for interest rates.  This is consistent with our experience when we have purchased cars and initially purchased our home several years ago.  Our credit scores might not be 800, but I couldn’t care less if they aren’t “perfect” as long as we are still getting the best interest rates!  We pay all of our bills on time and ultimately that is what matters the most.  We also keep our credit utilization rate pretty low (usually no more than 20% overall), so it doesn’t look like we are maxing out our cards.  This is actually made easier by having lots of available credit that we aren’t using on our various cards.

Overall Experience:

Refinancing was a royal pain in the tail, but that was much more related to documenting every penny we make, not so much how we spend those pennies or what cards we pay each month.  I’m glad we did it as it will save us tons in interest by getting our home paid off much quicker and at a lower interest rate, and I’m very glad that our rewards credit card “habit” didn’t have any negative impact.  Again, this was just our story.  I can imagine if you were in a more precarious position in terms of credit history or your home’s value vs. how much is being refinanced, that all details might matter even more.  I really don’t know for sure what could ultimately tip the scales in terms of interest rates, but I think that being cautious with everything is smart if you are going for a big loan in the near term.

That said, applying for a new card here and there didn’t end up hurting us at all.  Here’s to 120 more payments until this house is actually ours, and lots of nice miles and points bonuses along the way!  After our Spring Break adventure is over I am looking forward to getting a card or two that I have had my eye on for a while!

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  1. Hi Summer,

    We applied for a mortgage late last year and the overall experience was the same as yours. The underwriter inquired about my recent credit card app but not the ones out of the 90 days window. Congrats on your new mortgage and to more years of travelling.

  2. I was able to refinance in between churns with no problem at all and I got my interest rate reduced by over 3%. I was surprised that even though I was applying every three months for 3-4 cards, I was still able to get such a good deal.

  3. We’re in the refinancing business. For the purpose of a mortgage refi, the number of credit inquiries don’t matter as much as it’s blown up to be, assuming you have a strong credit score. Not necessarily in this order, what’s important is debt to income ratio, good payment history and also being able to substantiate and source the monies you show in your bank accounts.

  4. I did the same thing a few months ago and it was fine—though I don’t churn that much. Could you share how often you are taking out new cards and how many at a time? Just you (not including your husband) and/or how many you were taking out before he was able to start churning with you?

  5. Oh wow, I know you are glad that is over. That is the same feeling that I get every year when we are doing taxes. LOL! We have a business and although I am very organized, it is alot of information to get together every year to hand over to our CPA. Then I do the taxes for my three young adult sons (two that are in college). Their taxes are easy. Then it is time to complete the FAFSA that the colleges require you to do every single year. The FAFSA is a complete waste of time to me because it has never, ever helped us—ever. I have a question for you. If my husband co signed for a bank credit card a few days ago, will it hurt him to do a few applications today? I know I should have done them that day but didn’t get around to it. I know the general rule is to apply for a few cards on the same day so that the banks don’t see the other inquires. What do you think? By the way, his Equifax score was 784.

  6. Curious about one thing … did the mortgage people ever bat an eye at any MS activity in your accounts? I’m imagining loading the bird and then transferring money to your checking account. And the related high credit card balances that come with it.

  7. NSW,

    They will question any deposit money into your bank accounts. I use Amazon Payments every month and I explained that I sell stuff on Amazon.

  8. I’m looking for a home right now, and for that reason, I haven’t applied for any credit cards in about 18 months. CreditKarma and CreditSesame both have my credit score in 760-765 range. Total credit limit is around $100K (I have 9 personal cards) and utilization is around 4%. I’ve had no hard checks in over a year, but I am VERY tempted to apply for 1 or 2 cards (AA 100K and AMEX Blue). Realistically, how much harm would 1 or 2 applications cause me? All the online literature I’ve read say to apply for NO cards for 1-2 years before a major loan.

  9. If you haven’t already, you should look into EVOLVE to pay your mortgage with a DEBIT card, with NO additional fee for regular payments…. *wink* *wink*

  10. Danh
    $1,000 per month via AP is likely an easy explanation. (That is, setting aside the fact that you’re lying to a loan officer, if you’re ok with that.)

    Laundering $5k per month from bird loads would raise eyebrows, no? I wonder if the bank would find that shady.

  11. I’m pretty light in the world of MS, but any of my BlueBird stuff never hits my checking account, so that is a non-issue.

    I don’t think that $1,000 here and there was an issue in our case, but of course every situation is different.

  12. airgypsy said (in comment #3) that “…what’s important is…being able to substantiate and source the monies you show in your bank accounts.” Amen!

    During our re-fi, the examiner became very curious about a modest one-off deposit into my checking account. It was merely an anniversary gift, but it had to be justified.

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