Introduction
Do points and miles scare you?
Are you worried opening too many credit cards could affect your credit score?
Let me tell you definitely— you are not alone.
Back when I started this journey, I was always worried about my credit score coming in the way of my travel dreams.
I learned over time that you can use points and miles to travel for free WITHOUT hurting your score.
You just need to be mindful of your spending and set your financial goals ahead.
So what then will hurt your credit score, you ask?
4 Factors That Impact Your Credit Score
Before you go on applying for new credit cards to build your points profile, you need to understand what goes on behind the scenes. A lot of factors can affect your score and some of them negatively.
And here’s what you need to know about credit scores to make an informed decision:
- The two large factors that make up more than half of your credit score and can impact it the most are:
- Payment history – Late payments can hurt your score. Set up autopay or reminders to pay your bills on time.
- Credit utilization – This indicates the amount of available credit you have used (the lesser the better). It is recommended to not exceed 30% of your available credit across all your cards. Set balance alerts to be alerted when you go beyond the limit.
- Credit history length – How long you have owned your credit accounts makes up 15% of your FICO score. This takes into account the age of your oldest credit account, the age of your newest credit account, and the average age of all your accounts. Generally, the longer your credit history, the higher your credit scores.
And most importantly, closing a credit card that you opened 10 years ago could add a negative impact on your credit score. If you have no annual fee on your oldest card, probably just hold on to it, locked away in a safe place to keep your credit score going strong.
Ensure you make at least one transaction each year to keep your account active. - Credit mix – A diverse portfolio of credit accounts that includes student loans, credit card accounts, car loans, mortgages, or other credit products will often give you a higher credit score. The credit mix is a testament to your credit management skills across a wide range of credit accounts.
- New credit – The number of new credit lines you have opened in the recent past will also be reflected on your credit score. This is mainly because when you apply for a new card, the creditor does a hard inquiry or a “hard pull” to look into your credit file to understand if and how much of a risk you pose as a credit card holder.
So, if you are planning to open a profitable rewards credit card in 2023 to boost your points and miles game, keep these factors in mind to make sure you are not hurting your score.
And as always, spend responsibly, question ruthlessly, and travel carefree!
