Update: One or more card offers in this post are no longer available. Check our Hot Deals for the latest offers.
Collecting miles & points is a fantastic hobby that can save you hundreds of thousands of dollars. But you can’t get in the game if you don’t have a good credit score!
I’ll show some ways you can increase your credit score. You’re better off paying your balances in full and increasing your credit score, than applying for new cards.
How Is Your Score Calculated?
According to FICO, your credit score is based on 5 categories:
- Payment history – 35%
- Amount owed or credit utilization – 30%
- Length of credit history – 15%
- New credit – 10%
- Types of credit used (revolving credit vs. installment loans) – 10%
It’s important to maintain a good credit score so you can get good rates on major loans (i.e. home, car, and student). Having good credit will also help you get Big Travel!
So what can you do to increase your score? Well, it depends on your situation.
Do You Have a Low Credit Score?
The most important aspect of your credit score is your payment history, because it accounts for 35% of your credit score. So the best thing you can do for your credit is pay your bills on time!
Here are some tips & tools that can help get your credit back on track:
Auto-pay is an excellent way to ensure your bills are paid on-time. This not only helps your credit, but also helps you avoid paying late fees.
However, start out slowly and make sure you have sufficient funds in your bank account, so you don’t wind up paying overdraft fees instead!
2. Change Your Due Dates
You can request to change your due dates to a more convenient time. For example, some folks like to have all their bills due the same week they get paid.
3. Use Apps That Help Track Your Accounts
There are also fantastic apps that can help you keep track of your account balances and payments dates including:
- Mint – Puts your loans, bank, and credit card accounts all in 1 place and helps you budget
- Check – Manage all your accounts, pay bills, and transfer money
- BillMinder – Tracks expenses on all your accounts and adds payment due dates to your calendar
4. Pay Off Any Debt
Unpaid bills can really weigh down your credit. So take steps to pay down these debts.
If you have credit card debt, 1 option may be to transfer the balance to a card that offers no interest for 12 to 18 months. The Chase Slate card is an excellent option because it also does NOT charge a balance transfer fee during the 1st 60 days, which can cost ~3% of the amount you transfer on other cards.
However, this is only worth it if you can pay off the balance during the no interest period. Because after that you will be charged regular interest rates depending on your credit score.
Do You Have a Short Credit History?
Some folks may have a low credit score simply because they have little to no credit history. For example, maybe you’re a student and you’ve never had a credit card.
Here are some ways you can start demonstrating to banks that you know how to handle credit responsibly.
1. Sign-up for a No Annual Fee Card
The length of your credit history accounts for 15% of your score. You can increase the length of your credit history by applying for NO annual fee credit cards. And keeping your oldest cards.
In addition to increasing your credit score, NO annual fee cards are the best way to establish a good relationship with the banks.
Some of my favorite NO annual fee credit cards include:
2. Become an Authorized User
Having a relative or close friend with excellent credit add you as an authorized user on one of their credit card accounts can also increase your score. Most credit cards allow the cardholder to add an authorized user.
This is an easy way to begin developing a credit history.
And you will still get the sign-up bonus if you decide get the same card on your own once you have better credit.
But there are some drawbacks to this strategy.
Make sure you trust that the primary cardholder handles their credit responsibly. If they don’t pay their bills on time or max out the card this will negatively impact your credit score.
The primary cardholder should be aware that there are certain risks that go along with adding you as an authorized user:
- They are ultimately responsible for your charges
- Their credit score could decrease if you use a large percentage of the available credit or if you don’t pay your bill on time
The primary account holder does have the option to remove you as authorized user. Usually this can be done with a call to the bank and you will be removed within 24 hours. However, each bank is different.
Note that if you’re removed as an authorized user, the credit history will also be removed from your credit report. So this will impact your score.
You can also be added as an authorized user without getting the actual card. This will still add the history to your credit score.
3. Apply for Cards That Don’t Require a High Credit Score
Another way to establish a credit history is by applying for a credit cards that are easier to get approved for such as:
- Secured cards – To get a secured card, like the AeroMexico Secured Visa, you have to make a cash deposit (usually at least ~$300 to ~$500) and that amount becomes your credit limit. It’s like getting a secured loan from the bank.
- Entry-level credit & store cards – Cards like the Capital One Classic Platinum card and some retail store cards are specifically targeted for those with a low credit score or a limited credit history.
- Certain rewards cards – Many reward credit cards require that you have excellent credit. But cards like the Chase Freedom don’t require a long credit history.
If you have a low credit score or a short credit history, check out my full list of cards that may work for you.
If you can’t pay your bills in full and on time each month, this hobby may not be a good choice for you. That’s because most rewards credit cards charge high interest rates which can negate any benefit you get from the miles and points.
Additionally, you need a good credit score if you want to get Big Travel with Small Money, so you can get approved for the cards with the best deals.
So before you get started collecting miles and points make sure you take steps to pay your bills on time and establish a credit history.