5 Ways to Boost Credit Card Perks Without Lowering Your Credit Score
Credit card perks can be very useful and with one or two good cards — you could be enjoying free airline flights, free hotels stays and more.
In fact, one person with a 721 FICO Score applied for 14 credit cards at once, just to max out the points and rack up almost one million frequent flyer miles. But, how do you do that if you don’t plan on ruining your credit score.
As it turns out, if you employ a few simple strategies, it’s very possible to rack up enough points for free flights without ruining your credit score.
Here are five things you can do to get free airline flights and hotel stays without ruining your credit score:
1. Pay your balance in full each month — this is the simplest strategy, but also the most important. The fact of the matter is that credit-card companies don’t care how many cards you have as long as you’re a responsible spender.
This is reflected in the way your credit score is calculated. Only 10 percent of your overall credit score is affected by new credit-card inquiries. In other words, when you apply for a new card, you’re only going to see a small drop of a few points. Even better, if you follow step two below, then this drop typically vanishes after a few months. In fact, your score might increase.
2. Keep your spending habits the same — getting a new credit card can actually help your credit score.
There is a component of your credit score called the credit utilization ratio. This ratio refers to the percentage of your credit limit that you typically spend. For example, if your credit limit is $10,000 and you spend $4,000 per month, then your credit utilization ratio is 40 percent.
If you keep your spending habits relatively similar when you get a new credit card, then this ratio should drop. For example, a new card might boost your overall credit limit to $15,000 and if you’re still spending $4,000 then your ratio would drop to 26 percent. This drop is a good thing, because it indicates that you can handle higher credit limits and still be a responsible spender.
This is one reason why many people can apply for a dozen credit cards and still maintain a 780 credit score and above.
3. Stack your inquiries on the same day — if you’d like to try to earn hundreds of thousands (or even millions) of frequent-flyer miles, then it’s best to stack all of your applications on the same day.
As mentioned in steps one and two above, you may see a small dip in your credit score early on, but if you spend responsibly over the next few months, then you’ll likely see an increase in your credit score as time goes on.
In the long-term this means that your score will be back to normal by the time you apply for a new set of cards in a few months and repeat the process to get even more miles and points.
4. Make sure you can meet minimum spending limits and plan accordingly — the system for maximizing credit-card points is pretty simple.
Get a new card, spend the minimum amount necessary to get the frequent flyer miles, and then stop using the card or cancel it a few months later. Then, you move on to the next card and repeat the process.
The one caveat is that you need to hit the spending limits for each card to maximize your points. For example, you might be awarded an additional 20,000 points after reaching the minimum spending limit.
In most cases, this is fairly easy. A typical spending limit might be $3,000 in the first three months or $5,000 in the first six months. Use your new card to pay your rent or mortgage for a few months and you should have it covered. That said, some cards do have higher spending limits, so make sure you check before you apply and plan accordingly.
5. Stay up-to-date on the best deals — credit-card companies are constantly adjusting their offers, rolling out new cards, and removing old ones. If you want to maximize your credit-card perks, then you need to stay up-to-date on the latest deals so that you can get in at the best time.