How Credit Scores Work

Beginners Guide To Miles & Points
What’s The Point?
How Loyalty Programs Work
Credit Cards and Credit Scores
Types of Miles & Points
Identifying Your Travel Goals
How Alliances Work
Credit Card Strategy For Beginners
Earning Miles & Points
Hotels Matter Too
What’s Next?

Now that you have a bit of background information, let’s talk about how to leverage the relationships between the banks and airlines into fantastic travel opportunities.

The secret, which probably seems apparent by now, is in getting the most out of credit card rewards. I earn about a million miles and points a year through taking advantage of the best credit card offers, and allocating my spend accordingly.

This is something that anyone can do.

Before we talk about specific cards, I first want to talk about a couple of the most common questions I get whenever credit cards come into discussion: credit scores.

How Credit Scores are Calculated

There are a lot of misconceptions about how credit scores work, as most people believe that applying for a credit card will negatively impact their credit score.

In reality, credit scores are made up of the following components:

Credit score breakdown

35% of your score is made up of your payment history
30% of your score is your credit utilization
15% of your score is your credit history
10% of your score is made up of the types of credit you use
10% of your score is your request for new credit

When you apply for credit cards you get hit with an inquiry, which falls in the category of requests for new credit. You’ll temporarily be dinged 2-3 points on your credit score, though that falls off within two years.

Meanwhile virtually all the other components of your credit score can improve as a result of applying for a credit card, meaning your credit score can actually go up as a result of applying for more cards.

As long as you keep your credit utilization low and make your payments on time, you shouldn’t see a negative impact on your credit score from applying for cards.

If you haven’t done so recently, you’ll want to look over a copy of your free annual credit report and check for inaccuracies.

To determine your credit score, my best suggestion is to use a free service like Credit Sesame. There are several others as well, and it doesn’t really matter which you use. You could also enroll in a professional credit monitoring service, but I’ve never really found that necessary – the free service should work just fine.

You’ll need to enter your social security number, and will then receive a report with your credit score, credit utilization ratio, and debt to income ratio.

If your credit score is above 720 or so, you should have no problems getting approved for any of the credit cards that we’ll discuss.

How to Use Your Credit Card

Before we go any further we need to have a serious conversation about credit. If used wisely, credit cards can provide some fantastic opportunities, but the math only works if used strategically.

If you do not, or cannot, pay your credit cards in full, each and every month, stop.

You should not be looking at funding travel with credit card points.

To be clear, I am not judging anyone’s financial situation – it just doesn’t make sense to pay a 15.4% interest rate in order to get 1%-5% back on travel.

If you are a student, or don’t have a strong credit profile, that’s okay. You’ll just want to start small, with less rewarding cards that help you to build your credit.

Thankfully, I am in a position to pay my cards in full, each and every month.  Believe it or not, my credit score is actually much better now than it was before I started applying for lots of credit cards, and I apply for about a dozen a year.

A dozen a year?!? You can’t expect everyone to do that!

Nope, I don’t.

Nor do I expect anyone else to fly hundreds of thousands of miles per year in international first and business class, fantastic though it may be.

For most people, a handful of credit cards will be enough to have a significant impact on the way they travel, or the frequency with which they can afford to travel.

But I want to show you what is possible, and when it comes to miles and points, nearly anything is possible.

Next: Types of Miles and Points

  1. Hi, so when you apply for credit, get the card, do what’s required to get the points, do you then cancel it ? Cause how can one have a hundred cards, lol. Thanks. Susan .

  2. Lucky, I have a great credit rating in Canada and have taken advantage of most of the offers there. I have just qualified for my first bona fide US credit card and wonder how long it will take to build a reasonable credit history in the USA. I plan on spending a small amount on my US card each month, and, of course, paying off the balance in full. Since I am just beginning to build a US credit rating, how long do you suggest that I wait before applying for my next card? Six months? A year? Thanks.

  3. @ Jill — I’d say six months sounds about right. It all depends on your credit score and what it shows, but I think that’s a good starting point.

  4. Hello Lucky,

    I only have couple cards on hand but it’s sort of tempting to start applying the new cards soon after reading your blog. However, as I am not a big shopper, how to efficiently or easily complete the minimum spending needed to get a sign-up bonus on a new credit card? Thanks!

  5. @ Derek — If you do pay taxes, one easy way is to pay your taxes by credit card. You pay a sub-2% fee, but it’s well worth it for reaching minimum spend, in my opinion.

  6. Hi Lucky,
    Above you mentioned a sub 2% fee. I’m not sure what that means. How do I go about paying with my credit card for taxes?
    Thanks for your help!

  7. Susan S. had a good question, ” how can you have 100 cards?” How long do you typically hold onto a card for? I think a lot of us have the idea that constantly canceling and applying for cards has a negative effect on our credit/ eligibility to get more rewarding cards.

  8. Lucky,

    On a whim, I applied for and received the United MileagePlus Explorer business card. I cancelled the non-business version of the card in March of 2014. I couldn’t find an answer to this question specifically, so what are the chances that I will get the mileage bonus when I meet the minimum spending requirements?


  9. Ben, please answer Carlos & Susan’s questions on “how long to do you keep the cards after you gain the signup bonus” as I have the same question.


  10. Hi Lucky,

    I leave in Texas and I have a great credit score. I usually take a couple of nice vacations per year outside US. Can you give me some suggestions about credit cards? I’m willing to get an United card, not sure which one. thanks

  11. Hi Lucky

    Love the ideas here. You say you open about 1 new CC per month. At that rate the annual fees must really build up. And at what point do you start to close some of these accounts?


  12. Vivo en España puedo solicitar algúna tarjeta Americana que me de puntos para viajar???’…..pienso comprar un viaje un viaje al año para 4 personas a los Estados Unidos de America

  13. Hi new here and have a quick question

    Have miles in virgin america. Korean airlines and delta.. Can i move to a single miles account and avoid losse them for not use..??

  14. HI Lucky,

    do you know about any credit cards for European citizens? I assume most of your tips & tricks are aimed mainly for North Americans. Still, great recommendations, really enjoying reading your blog, keep it up please!

  15. We will need to make a large house expense ($4k+) soon, and we can use a credit card to pay the vendor.

    Which credit card do you recommend that will have the highest mileage reward for spending appx $4k over the first three months? I only have a Delta Skymiles account but wish the skymiles were transferable to other airlines. Do you still recommend American Airlines?

    I enjoy your newsletter – it is well written and very informative!

  16. Lucky, my wife and I have been referring friends to different credit cards through the provided links from those specific cards. We have found that our friends are not receiving these referrals or in some cases getting them a week or more later and Chase is especially bad. AMEX appears to be fine. As you know when someone decides they want to get a CC they usually want to do it now and not wait. Is there some way we can get Chase to allow us to provide these friends a link like the ones that you use on OMAAT?



  17. Interestingly enough, I applied for a Frontier Airlines card many months ago and was denied. WTF? Since then I have received an Amex Everyday Preferred card, an Amex Premier Gold card, and an Amex Platinum Delta card. So what gives with a two bit operation like Frontier?

  18. Hi Lucky

    I have Chase Saphire Reserve card and the SPG Amex card. I’m not sure which one to use under which circumstances in order to maximize my points. Also, I have SPG Gold status and would like to get to the Platinum level. Most of my business travel related stay at SPG gets charged to my corporate card, so, I’m also beginning to wonder if the SPG Amex card will do me any good. Any advice is really appreciated?


  19. Hi Lucky
    I am a non-US resident.Is anything on your method/system applicable in any way to me ?

  20. Love reading about how the US system works. Unfortunately the UK especially and Europe as a whole is much tougher on their lending criteria and getting anymore than a few cards a year isn’t possible. Plus the cards in the UK aren’t nearly as beneficial as their US counterparts. Still you never know when that will change. Thanks for the great articles.

  21. I am from India but i travel a lot, Most of the US credit cards will not be available in India. Do you have any options for the best credit cards which are not location dependent?

  22. an article i read online has done more harm than good to me in the past few told me ways on how to fix my credit scores in weeks.i tried it and to no avail it didn’t work well for me.While searching for a good credit repairer online i came across few comments,Although i was a bit leery about this.i read on the blog many comments concerning how certain hacker assisted them to boost i tot giving [email protected] a shot isn’t a bad idea regarding a stellar credit score which i had and I’ve not asked for anything to be discharged, even though they’ve offered and within 18 months it was shot down. I need it to go back up and was hoping to enlist the help of a credit repairer and finally i got saved by hackmania in as much as i know all this hackers have their pros and cons.i wasn’t searching for cheap but was looking for excellent work to be carried out on my report.

  23. I recently took out the Amex Gold Delta Skymiles card with 30k miles and $200 credit for my recent flight to MSP. I satisfied the $2000 spend and checked on my miles/credit and was told I was not eligible but the agent didn’t know why. After 5 weeks and another call to Amex they still can’t or wont tell me why they deny my benefits. Anybody else been denied thier benefits on an Amex promotion?

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