Previous Topic (Introduction) — Next Topic (Fare Wars)
It is possible to use your good credit to obtain free travel; lots of free travel. My good credit has been responsible for the largest percentage of my frequent flyer mile accrual.
This technique is NOT for everyone. At the outset of this section it must be made clear that: “Your credit is one of your most important assets” Credit should not to be abused in order to collect frequent flyer miles and points. The ability to buy a home, automobile, or pay for a college education will provide substantially more benefit in your lifetime than a few miles. If there has to be a reason to maintain your good credit choose the home, car, or education. But, I hope to show you how it is possible to have all of the above.
Credit card companies, in their attempt to lure you to use their product, offer huge sign-up bonuses for applying, being approved, and using their credit cards. A typical sign-up bonus has a value of more than the cost of a domestic round-trip ticket. I have applied for credit cards for years, fulfilled the requirements to achieve the sign-up bonus and never used that card again. There are literally hundreds of rewards travel cards available. Some companies still let you have more than one of the same credit card and will give you the sign up bonus each time you apply. These are disappearing rapidly though. It is becoming a “One time, One sign-up bonus world”. I have applied for and received over 95 credit cards to date. My scores are still in the “good credit” range. Now, back to our plan.
Every one of us is rated by all three of the credit reporting agencies based on our past credit history. We have a credit report on file that lists our past credit activity and a credit score assigned to us based on our past credit performance.
The three reporting agencies are Equifax, TransUnion, and Experian. Credit lenders hire one of these 3 agencies to send them a report on your past credit when you apply for a loan or credit card and also to send along their rating of your credit in the form of a credit score. The higher the score, the better your credit according to the agency.
It is important for you to review your credit report and credit score frequently. It has been reported that over 10% of all credit reports have errors on them that negatively affect your credit score. Make sure the information is correct on your report. I offer links on the left hand blog column for “free credit score trial offers” if you cancel within the 7 day trial offer period. Many of those offers will also include a copy of your credit report.
There are currently two scales of credit scores: FICO and VantageScore. The FICO scale runs from 300 to a high of 850. An acceptable score is above 660 and a good score is above 700. The VantageScore system runs from 501 to a high of 990. In years past, the FICO scale has been the most common although the newer VantageScore scale comes with an easy to understand letter grading system as well, and is gaining prominence in the lending community.
VantageScore scale:
901 to 990 – A
801 to 900 – B Target range for our purposes
701 to 800 – C
601 to 700 – D
501 to 600 – F
For purposes of discussion let’s stay with the old standby, the FICO system and the belief that a score of 700 and above is a good credit score.
What most people fail to realize is that if you have a credit score that is 720 or 780 or 850, your loan for a car, home or student loan request will be approved all other factors being considered. It is not necessary to have a perfect score, just a good score. Any score higher than the acceptable 720 or so is actually “excess good credit”. I’m suggesting using that “excess good credit” to obtain free travel. Making your payments on time, keeping your balances at less than 50% of available credit, and not applying for too many loans or cards within a short time frame are the important factors that affect your ability to be approved. If you agree to make your payments on time and not use more than 50% of your credit lines at any one time, you can control your scores by controlling the number of credit inquiries.
Each credit inquiry is reflected in your credit score for 2 years and has a diminishing negative effect for that time period. Credit inquiries fall off your report at the two year mark. By carefully applying for credit cards with high sign up bonuses, you can see the world at prices you can afford.
Previous Topic (Introduction) — Next Topic (Fare Wars)
