How Travel Hacking Impacts Your Credit Score

As with all things, your mileage may vary, but the most common fear people have when it comes to travel hacking is what it will somehow destroy their credit score. We'll disclaim at this point that we're not financial experts, nor do we have any "inside" information that you won't find through further independent research on this question on your own. Moving on...

While there are strategies that can significantly negatively impact your credit score, (1) we don't advocate any of those strategies and (2) people who apply those strategies typically are still aiming for better credit in the long run.

Remember, the best travel hacks require credit card companies to trust you. There would be no such thing as travel hacking if these strategies burned that trust by crushing credit scores.

How Does Travel Hacking Impact Your Credit Score

Your credit score is made up of the following factors:

  • 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

That 10% for new requests — that is the fraction that is negatively impacted when you apply for a new card. The other factors ("types of credit" possibly excepted) will all be improved as you show yourself to be a more trustworthy borrower, capable of having lots of credit and not using it irresponsibly.

The short of this is that if you're paying your balances in full every month, getting new cards and keeping the accounts open for long periods of time will improve your credit score.

A Real Life Example

Here's a chart of my credit score, as determined by Discover:

Here are the months in which I opened new cards: February 2016, July 2016, October 2016. Notice anything about those months? My score went up each of the following months! In fact, in July 2016, my score didn't even go down as a result of the new account.

Conclusion

None of this is to say you don't have to be careful with how you travel hack. There are risks involved. If you're not organized enough to make all your payments, for example, you run the risk of dinging your score. If you apply for multiple cards at the same time, you're likely to wind up with a temporary dip in your score. But opening new lines of credit and keeping them paid is good for your credit score in the long run. So don't think of travel hacking as an either/or - it is a partner in developing your credit history and proving yourself a responsible borrower.