Your credit score is a huge part of your finances. You can’t travel without money, right? That’s why using frequent flyer miles and loyalty programs can be so useful. I’ve gotten flights and hotels that should have cost hundreds of dollars – for $25 flights and free hotel rooms.
The best way to earn miles for free flights is to sign up for a branded credit card. These cards reward your purchases with miles or credit card points directly, which dramatically speeds up how quickly you can get your free travel!
Why Your Credit Score Matters
Credit scores determine what your interest rate will be if you borrow money. Some employers and landlords check your scores as an indicator of your reliability before sending you an offer.
Most importantly, the best credit cards only accept people with the highest scores! While 750+ out of 850 is very high and not necessary for approval, having a 750+ score means you will have a great advantage in getting low fees, being approved for fee waivers, and being eligible for massive sign-up bonuses.
Getting and Keeping 750+ Credit Score
Regardless of your current score, getting a 750+ credit score is not a challenge. It just takes a bit of patience and a plan.
[Recommended Read: Spend Consciously Every Day]
1. Get an Overview of Your Finances
If you want to dabble in credit card hacking, you better have your finances in order. Mistakes with credit cards can be fixed, but rebuilding your credit is harder than getting started on the right foot.
While having credit card debt (not paying off the balance in full at the end of each month) is not the end of the world, it doesn’t do you any favors. Trapping yourself in credit card debt and high interest makes travel harder.
The best thing you can do is sign up for a service that aggregates your account information. That way, you log in and can see all the cash you have as well as any charges that show on your cards.
I have used Mint for years, and it’s a great, free tool. It automatically syncs all my accounts each time I log in, so I can get an updated view of everything. If anything suspicious happens, I can contact my bank(s) right away. It offers basic spending tracking, categorization of your budget, bill pay, and a credit score, but it works for me!
2. Understand How Credit Scores Work
To beat the system, first understand the system. Three companies report official scores, and the three scores are combined to make up your FICO score. The FICO score is the one that most banks will value the most.
FICO scores range from 300-850, and 750+ is excellent (the highest category). The factors considered in calculating it are:
- Payment History (35% of most scores): whether you have paid on time
- Credit Utilization (30% of most scores): how much of the credit available to you that you are actually using
- Length of Credit History (15% of most scores): average time your accounts have been open
- Number of Accounts (10% of most scores): the more, the better
- New Credit Inquiries (10% of most scores): have you been applying for lots of cards or loans at the same time?
Once you know the factors that count, you can focus on them!
3. Track Your Score
You can only improve what you measure!
Make sure you have an idea of where your score is. You can entitled to a free credit report once every 12 months at AnnualCreditReport.com. This is completely free and US-government approved. Getting your report is a good idea because many of them make mistakes, especially if you have a common last name, live with family members, or change your name. The report takes 2 minutes to get and includes the accounts you have but not your actual credit score.
You are get your credit score through a service like Credit Karma, Mint, or your credit card bank. These places offer your score as an incentive to get you to sign up, and may push different financial offers to you in exchange. Not all of the ads are bad, but be careful before signing up for something through CK or Mint.
These website and your credit card provider may update your score as often as monthly. While it won’t change much day-to-day, getting updates with these resources more than once a year is helpful.
[Recommended Read: How to Get Started with Frequent Flyer Miles Today]
4. If You Have Missed Payments Before, Make More Payments (On Time)
Payment history, or how many times you have paid your bills on time, is the most important factor of your credit score. To be in the “excellent” category, you must make on-time and at least minimum payments every month. If you miss one, your credit report will show it.
The lowest category shows that 97% payments are on time, so your best bet is to make more payments. One out of ten is much more significant than one out of 100. There are plenty of credit cards for people who want to rebuild their credit if it is bad, and these cards have no annual fees. Apply for one of these, put a recurring charge on it (phone bill, Netflix, etc.) and pay it down every month. Use Debitize (see the bottom of the post!) to make sure you only buy what you can afford. Your payment history will quickly recover.
5. Ask the Credit Agency/Bank to Remove Derogatory Marks
Most bad things (like missing a payment) will automatically be added to your credit report. However, simply asking your bank and/or credit agency to remove it can work wonders. You can explain that the mistake was simply an oversight and point to all the other times you have paid on time. Many banks will forgive you for one or even two mistakes.
6. Set Up Automatic Payments
Don’t ever miss a payment again! Set up auto pay for all your accounts.
Some people don’t like to pay without checking their transactions. Using Mint can help, as Mint will list transactions for all your accounts in once place as soon as they appear. Furthermore, Mint and every bank I have credit cards with email me when there is a new bill issued. I have the option to check the bill every month before the payment is due (I usually have at least two weeks between receiving the email and having the funds directly subtracted from my account).
[Recommended Read: How to Leverage Airline Alliances in Earning and Redeeming Frequent Flyer Miles]
7. Request Limit Increases (Keeping Utilization Low)
Payment history and credit utilization each make up 30% + of your credit score. Credit utilization refers to the percentage of your available credit that you actually use. If your limit for your card is $1000/month, you use 10% if you spend $100.
The ideal is 0-9%, which you can get by lowering your spending or increasing amount of credit you have. You can either open a new credit card or increase the credit limits of the cards you already have. Most banks allow you to request credit limit increases directly through their website! Fill out some basic information about your finances and you can usually have an answer in minutes.
In cases that you are denied, some banks allow you to petition their decision. Call them up, explain why you want a credit increase, and usually they will offer it to you!
8. Never Cancel Your Oldest Cards
Your average age of accounts the next most important factor of your score. The excellent categories requires 9+ years for your average age of accounts. That means, if you open a new account, your average age of accounts drops dramatically. Instead of canceling your oldest cards, ask your bank if you can switch to a free version of cards that have annual fees, or negotiate your interest rate. Banks would much rather help you than lose a customer.
9. Apply to Several New Cards at Once
Each time you apply for a new card, it counts as a credit inquiry. Applying for too much credit at once makes it seem like you are desperate for cash and unlikely to pay back your charges. However, new inquiries usually take a couple days or weeks to show up on your report. By applying for several cards at once, you can make sure your score is high when you apply.
A couple months after applying, you credit score should rebound and may be even higher.
10. Continuously Monitor Your Credit Utilization
Out of all the factors that influence your credit score, your credit utilization is the only one you can make a big dent with in a short period of time. Paying off your charges before your bill is due can bring this number down – even if you only pay part of it.
[Recommended Read: The 5 Best Websites for Advanced Frequent Flyer Miles Strategies]
My Recommended Credit Management Tool: Debitize
The app Debitize (web, Apple, Android) is an incredible tool for money management, especially if you are wary of credit cards. You can link your credit cards and bank account to it, and it helps you spend like a debit card – so you don’t have to worry about not having enough money to pay your bill in full at the end of the month.
As soon as you charge your credit card, the funds for that charge go directly from your checking account to your Debitize account. About a week before your bill is due, Debitize uses the funds it has withdrawn from your account to pay down the balance. It also has a new credit utilization monitoring feature – if you opt in, Debitize will pay down your balance periodically to keep your utilization low. This can increase your credit score and save you from spending money you don’t have!
Give it a try here. Make 5 payments through Debitize and get $10 free!
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*I will receive a small bonus if you sign up for Debitize through my link!