The information provided on this blog is for general informational purposes only and does not constitute financial advice. I am not a financial advisor, and the content shared here reflects my personal experiences and opinions. Please consult a qualified financial professional for advice tailored to your individual circumstances before making any financial decisions.
Credit plays a crucial role in earning and redeeming points and miles. While I’ve always known the importance of a good credit score, I’ve learned that there’s a lot more to it—like why I have three different scores at once!
If you’ve ever wondered the same thing, you’re not alone. In this article, I’ll explain how credit scores work, break down the main factors affecting them, and share tips for using this knowledge to maximize your points and miles.
Credit Scores: What You Need to Know
Why Do You Have Multiple Credit Scores (FICO vs Vantage)
What I used to think:
- I have one credit score.
- If it’s high, I’ll get approved for any card I want.
What I now know:
- There isn’t one universal credit score.
- You likely have several scores that can vary by as much as 50 points.
- Approval odds depend on which score a lender checks and how your profile looks to that specific credit bureau.
Here’s why:
- Different Credit Bureaus: Creditors don’t always report to all three bureaus (Experian, Equifax, TransUnion), so your data can vary.
- FICO vs. Vantage: Two main scoring models exist, and while they use similar factors, they weigh them differently.
- Timing: Your score can change depending on when creditors report updates, such as payments or new inquiries.
- Luck of the Draw: At least it can feel that way! Lenders from credit card issuers to mortgage issuers may use one or many of your scores to evaluate your credit worthiness. It’s not always easy to know which one(s) a specific lender will pull from.
Understanding FICO and VantageScore
FICO and VantageScore are the two main credit scoring models, but they calculate credit scores slightly differently. Both pull information from the three main credit bureaus: Experian, Equifax, and Transunion. Here’s how they compare in terms of categories and their influence:
FICO Score Calculation
FICO scores range from 300 to 850, and their calculation is based on five key categories:
- Payment History (35%) – Your payment history is the most important factor. Lenders want to see that you consistently pay your bills on time. If you’re late, it’s a red flag that could impact your score for years.
- Points and Miles Tip: Pay off your credit card balance in full every month. Not only does this help your score, but it also prevents you from paying interest—essential for maximizing the value of your rewards.
- Amounts Owed – Credit Utilization (30%) – Credit utilization refers to the percentage of your available credit that you’re using. Example: If you have a total credit limit of $10,000 and your total balance is $2,000, your utilization is 20%. Keep this below 30%, and if possible, under 10%.
- Points and Miles Tip: Pay off your balance before the statement closes to show a lower utilization rate. I try to get this as close to 0% as I can!
- Length of Credit History (15%) – This measures how long you’ve had credit accounts open. The longer, the better.
- Points and Miles Tip: Avoid closing your oldest credit card account unless absolutely necessary. Even if you no longer use it, downgrading to a no-annual-fee version can help maintain your credit history.
- Credit Mix (10%) – Lenders like to see a mix of credit types, such as credit cards, mortgages, and auto loans. It shows you can handle different kinds of debt responsibly.
- Points and Miles Tip: While credit mix isn’t a huge factor, having multiple credit cards can be beneficial if you manage them well.
- New Credit (10%) – This includes hard inquiries from applying for new credit cards. Too many inquiries in a short period can signal risk to lenders.
- Points and Miles Tip: Use tools like pre-approval checks to minimize unnecessary hard inquiries. Most major banks offer this feature without impacting your credit score. Note that these tools DO NOT guarantee approval, but can give you an indication of whether or not you are likely to be approved.
Here are some examples:
American Express has an “Apply With Confidence” Feature. Even though there is not a tool to see which cards you may pre-qualify for, you can submit an application with American Express, learn whether you are approved or not, then make a decision on whether to accept (with no impact to your score).
VantageScore Calculation
VantageScore also ranges from 300 to 850, but it uses different weightings for its categories:
- Payment History (Moderately Influential) – Like FICO, on-time payments are crucial, but they are weighted slightly less.
- Credit Utilization (Extremely Influential) – More emphasis is placed on how much credit you’re using relative to your limits. Keeping utilization low is key.
- Credit Age & Mix (Highly Influential) – This combines credit history length and credit mix into one category, making them more important than in FICO.
- Total Balances & Debt (Moderately Influential) – Considers your total outstanding debt across all accounts.
- Recent Credit Applications (Less Influential) – Hard inquiries and new accounts have some impact, but less than in FICO.
- Available Credit (Least Influential) – The total credit available across all accounts, but it has a minor effect on the score.
Key Differences Between FICO and VantageScore
- VantageScore places more weight on credit utilization than FICO does.
- FICO separates length of credit history and credit mix, while VantageScore combines them.
- VantageScore treats available credit as a separate factor, while FICO does not.
- VantageScore can score consumers with shorter credit histories (1-2 months), while FICO requires at least 6 months of history to generate a score.
How to Check Your Credit Score
There are several free and secure ways to check your credit score, and choosing the right tool can help you stay on top of your credit health. Personally, I prefer Experian because it provides access to all three major credit bureaus—Experian, TransUnion, and Equifax—in one place for free. Over time, I’ve found Experian to be a reliable tool for tracking my credit scores and reports across all three bureaus. Plus, its quick freeze and unfreeze feature adds an extra layer of security and peace of mind.
Before that, I used Credit Karma, which is a solid option, but it only provides TransUnion and Equifax scores, leaving out Experian. If you want a more complete picture, using a service that shows all three can be helpful, especially when applying for a new credit card.
Other Free Ways to Check Your Credit Score:
- Many credit card issuers, like Chase, American Express, and Capital One, offer free FICO or VantageScore tracking, even without an account.
- Some banks provide credit score monitoring through their online portals when you have an account.
- AnnualCreditReport.com allows you to access your full credit report (but not your score) from each bureau once per year for free.
Keeping an eye on your credit scores and reports is crucial for making smart financial decisions—especially if you’re optimizing for points and miles. 🚀
How to Apply Credit Factor Knowledge to Points and Miles
Should I Close a Credit Card?
Closing a card can impact your credit score in two ways:
- Utilization: Closing a card reduces your total available credit, which can increase your utilization rate if you hold any balances.
- Credit History: If it’s an older card, closing it will shorten your average account age.
Alternative: Consider downgrading to a no-annual-fee card instead of closing it. This keeps the account open and preserves your credit history. If there is not a downgrade option that works for you, consider factors such as the annual fee and the value you will get out of that card. If it’s not worth it, closing it might be the best option.
Should I Add or Be an Authorized User?
Deciding whether to add or be added as an authorized user depends on your goals and the potential benefits and drawbacks. Consider these pros and cons:
Pros:
- Build or Establish Credit Early: Adding someone as an authorized user can help them start building credit or establish a credit history.
- Access to Cardholder Benefits: Some credit cards extend benefits like lounge access or travel protections to authorized users, making it a cost-effective way to share benefits.
- Lower Cost Than a Separate Account: Many cards charge no additional fee or a significantly reduced fee for authorized users, compared to the full annual fee they’d pay for their own account.
Cons:
- No Welcome Bonus: Authorized users won’t receive the lucrative sign-up bonus that they could earn by opening their own card and meeting the spending requirements.
- Hard Inquiry on Credit Report: Adding an authorized user may result in a hard inquiry on their credit report, which can be a drawback in the points and miles world, where minimizing hard inquiries is important for being eligible for additional cards.
What Happens If I Get Denied?
Denials Aren’t the End (Though I Know How Discouraging They Can Be)!
- A hard inquiry stays for 2 years but has minimal impact.
- Use the time to improve your credit and reapply strategically.
- Check pre-approval tools before your next application.
How Often Should I Apply for Travel Credit Cards?
The most important factor you should consider before opening any new cards is how comfortable you are paying off balances consistently. Then, ensure you are able to maximize sign up bonus offers including minimum spending requirements in certain timeframes. Know how much you are paying in annual fees and how much value you can get from that card. Once these factors are strongly understood and implemented, it is recommended to leave at least 30 days between approved applications.
Is Timing and Strategy Important When Opening Cards for Points and Miles?
Yes! Even before opening your first card, it is helpful to know that banks have both written and unwritten rules that may determine (outside of your credit score value) whether they’ll approve you or not. If you think you’d like to start a Points and Miles journey, you’ll want to research some of these rules and nuances, especially if you think you may want a specific card in the future.
In my experience, both Capital One and Citi seem to be sensitive to recent hard inquiries. If you really want a Capital One or Citi card, consider starting there first. In addition, Chase is well known for the 5/24 rule, meaning they will generally not approve you for a card if you show 5 opened cards on your credit report in the last 24 months. American Express has rules about the order of your cards and being eligible for sign up bonuses. I’ll be honest, you can’t know all of these rules, especially when you are starting out. I didn’t! My point is that if there is a card or a bank program you are really interested in, research some of the common application tips and tricks. The more information you have, the better!
Packing It Up!
Understanding the basics of credit is essential for anyone looking to maximize their points and miles. By maintaining a healthy credit score and using the strategies outlined here, you can unlock incredible travel opportunities and save money along the way.
Want to start earning more points and miles? Check your credit score today and plan your next travel card strategy!
Want more Information? Check out my other posts:
Photo by Rock Staar on Unsplash
