Credit Score Basics

Written By michael gray

Whether you’re looking to get approved for a new credit card, buy a home, or unlock premium travel rewards, your credit score plays a crucial role. Yet, many people misunderstand how credit scores work or assume that travel hacking(opening multiple credit cards for points) will hurt their score. In reality, with the right strategy, travel hacking can actually improve your credit score over time.

In this post, I’ll break down the basics of credit scores, how they’re calculated, how travel hacking can boost your score, and share actionable tips to raise your score quickly.

What is a Credit Score?

A credit score is a number (typically between 300 and 850) that represents your creditworthiness—how likely you are to repay borrowed money. The most commonly used scoring model is the FICO Score, though VantageScore is another popular model.

Here’s a breakdown of typical FICO Score ranges:

  • Excellent: 800 – 850

  • Very Good: 740 – 799

  • Good: 670 – 739

  • Fair: 580 – 669

  • Poor: Below 580

How is Your Credit Score Calculated?

FICO uses five main factors to calculate your score:

  1. Payment History (35%)

    • Do you pay your bills on time?

    • Missed or late payments hurt your score the most.

  2. Credit Utilization (30%)

    • The percentage of your available credit that you’re using.

    • Example: If you have a $10,000 credit limit and $2,000 in balances, your utilization is 20%.

    • Tip: Keep utilization below 30%, ideally under 10% for optimal scores.

  3. Length of Credit History (15%)

    • How long your accounts have been open.

    • Older accounts improve your score.

  4. Credit Mix (10%)

    • A mix of credit cards, loans, mortgages, etc.

    • A variety of credit types is seen as favorable.

  5. New Credit/Inquiries (10%)

    • How many new accounts or hard inquiries you’ve had recently.

    • Opening too many accounts in a short period can cause a temporary dip.

Can Travel Hacking Hurt Your Credit Score?

Short answer: Not if you do it right.

Travel hacking involves opening credit cards strategically to earn welcome bonuses and points. While it’s true that each new application triggers a hard inquiry, which may temporarily lower your score by a few points, this dip is often minimal and short-lived. The benefits of travel hacking can actually improve your score over time:

How Travel Hacking Can Help Your Credit Score:

  1. Increases Total Credit Limit:

    • More cards = higher total available credit, which can lower your credit utilization ratio.

  2. Improves Credit Mix:

    • Adding new credit cards diversifies your credit profile.

  3. Lengthens Credit History (Over Time):

    • As you keep cards open (especially no-annual-fee cards), your average account age grows.

  4. Boosts Payment History:

    • More accounts = more opportunities to demonstrate on-time payments, the most important factor in your score.

Pro Tip:

Keep your oldest credit card accounts open—even if you don’t use them often—to maintain a long average age of accounts.

Strategies to Quickly Raise Your Credit Score

If you’re looking to boost your score fast—whether to qualify for a new credit card or a major purchase—here are proven strategies:

1. Pay Down Balances (Lower Utilization)

  • Focus on cards with the highest utilization first.

  • Even paying down to below 30% can make a noticeable difference, but aim for 10% or less for the best impact.

2. Request Credit Limit Increases

  • Call your card issuer and ask for a credit limit increase without a hard inquiry.

  • This boosts your available credit, lowering your utilization ratio.

3. Become an Authorized User

  • Get added as an authorized user on a family member’s or friend’s account with a long history and low utilization.

  • This can instantly improve your utilization and length of credit history.

4. Dispute Errors on Your Credit Report

  • Review your credit report (available for free at AnnualCreditReport.com) for inaccuracies.

  • Dispute any errors—like incorrect balances or missed payments—to potentially raise your score.

5. Pay Twice a Month

  • Credit card issuers report balances at the statement close date. Paying mid-cycle and before the statement closes can keep your reported utilization low.

6. Avoid Closing Old Accounts

  • Unless there’s an annual fee you can’t justify, keep old accounts open to maintain your length of credit history.

7. Limit Hard Inquiries

  • Space out new credit card applications (every 3-6 months is a good rule of thumb for travel hackers).

  • Too many inquiries in a short time can temporarily lower your score.

The Sweet Spot: Travel Hacking + Credit Building

By managing your credit responsibly while travel hacking, you can enjoy the best of both worlds—free or discounted travel and a strong credit profile. Here’s the golden rule:

Never carry a balance or miss a payment.

The points earned aren’t worth the interest charges or the damage to your score.

With smart planning, travel hacking can not only fund your adventures but also build your financial reputation.

michael gray
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Choosing a New Credit Card