The Impact of Travel Hacking on Your Credit Score

By Tim, founder of Travel Multiplier.

Looking at the thousands of dollars of travel rewards you can earn, you might quickly wonder or worry if your pursuit of those rewards will put your credit score at risk. It's a valid concern, and one of the things that I wondered about when I first got into Travel Hacking. So let me walk through the details and factors so that you can move forward with confidence.

The Basics of Credit Score

If you don't know what a credit score is or why it matters, let me give you a quick flyover... Your credit score is a three digit number that financial institutions use to rate your trustworthiness with credit. Credit scores are typically categorically divided into four different score ranges:

• 300-629 - Bad
• 630-689 - Fair
• 690-719 - Good
• 720-850 - Excellent

Credit Score Factors

FICO groups credit-report information into five general categories. The percentages below describe their relative importance across the population; they are not a formula for predicting a change in your own score. See FICO’s explanation of score factors.

1. Payment history (35%)
2. Amounts owed (30%), including credit utilization
3. Length of credit history (15%)
4. Credit mix (10%)
5. New credit (10%), including recent accounts and inquiries

How Travel Hacking Specifically Impacts Your Credit Score

The way you apply for and use credit cards can move your credit score in either direction. Earning travel rewards doesn't guarantee a higher score.

A new application may cause a hard inquiry, and a new account can lower the average age of your accounts. Several applications in a short period can have a bigger effect. The size of a change depends on your credit history. See FICO’s explanation of new credit.

Over time, on-time payments and low balances relative to your limits can support healthy credit. More available credit can reduce overall utilization if balances stay the same, but that doesn't guarantee your score will rise. FICO also explains the credit risks of travel hacking.

You can't add the FICO categories together and conclude that opening more cards will improve most of your score. The effect depends on the full credit report.

Showing My Credit Score

As someone who has personally and professionally dove deeply into Travel Hacking, I've continued to maintain my excellent credit score throughout my entire journey. Below is a screenshot from my credit score for you to see for yourself.

This is my own experience, not a prediction of how opening cards will affect someone else’s score.

Credit Score and Card Approval

A credit score is only one part of a card issuer's decision. Income, debt, credit history, and the issuer's requirements also matter. A score of 670 or above doesn't guarantee approval or an instant decision. Chase explains why good credit alone may not secure approval.

If you find yourself with a low credit score, you can read How to Rebuild Credit for more background.

Check Your Score Now

It's important for you to know what your credit score is and the factors that are positively or negatively affecting it. One of the best free, secure, and helpful resources out there is Credit Karma. Check it out today at creditkarma.com