How to Use Your Wanderlust to Build Credit

Love to travel? Good news: There are ways to put that wanderlust to use with a travel rewards credit card.

Though travel rewards cards aren’t the easiest to get approved for as they require an excellent or good credit score, those who are able to snag one can use it to build better credit. (Just remember, before you apply it’s important to know where you stand so you don’t get turned down only to see your score suffer as a result of the inquiry.)

Travel Rewards Cards & Credit

A travel rewards credit card lets accountholders earn points or miles that can be put towards hotel stays, airfare and other travel expenses. These rewards can help travelers lower the cost of vacations, and the card itself can be a good tool for building credit.

If you make payments on time, eventually your score will begin to rise because this behavior creates a positive payment history, an important factor in credit scoring models. The card’s credit limit will also count toward your credit utilization rate, which is another big factor in scoring models. Your credit utilization rate is how much debt you carry versus your total available credit. For best credit scoring results, it’s recommended that you keep your debt below 10% and at least 30% of your credit limit(s). So if you charge a vacation and then pay most or all of the purchases off right away, your score could benefit.

You can keep track of how your usage and payments are affecting your credit by signing up for Credit.com’s free credit report summary. Beyond seeing your credit scores, you’ll be able to check how you’re doing in five key areas of your credit report that determine your credit score, including payment history, debt usage, inquiries, credit age and account mix.

Since interest rates for travel rewards cards tend to vary depending on creditworthiness, you’ll want to be mindful about carrying a balance. Doing so could hamper your credit goals, and the interest you pay could exceed whatever you’ve managed to glean from rewards. Many travel rewards cards carry annual fees, too, so you’ll want to make sure your spending habits justify the potential cost. (You can read about the best travel credit cards in America here.) Of course, making purchases on your card and paying them off quickly (and on time) will generally boost your credit.

Remember, if your credit is looking a little lackluster and you’re having a hard time qualifying for any type of credit card, you may be able to improve your scores by disputing errors on your credit report, paying down high credit card balances and limiting new credit inquiries until your score bounces back.

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