Introduction
A credit score is a number that consists of three digits. Your credit score is checked when you apply for a credit card. This helps the borrower to know whether you are able to repay the taken amount back or not.
If you have a bad credit score, the lender may refuse to give you a loan, or you might have to pay high interest on the principal amount taken. But if you have a good credit score, you can easily qualify for a loan at a lower interest rate.
What’s a good credit score?
There are two credit scoring models. These are FICO, which stands for Fair Isaac Corporation and Vantage Score. In both these two models, the scores are ranging between 300 to 850.
Why are credit scores important?
Whenever you want to get a credit card or apply for a loan, your credit score is a major determining factor in whether you will get the loan or not. If your credit history is not good, such as having late payments or other defaults, you may not get approved to get a loan or a credit card.
And if by chance you get approved for a credit loan or loan, you will get it at a very high-interest rate. This is not at all good for the customers because, in cash for long-term loans such as mortgages, you will have to pay thousands of dollars for a high amount of interest, which otherwise would have been saved if you had a good credit score.
Anything you want, any loan, be it a car loan, house loan, etc., the lenders will look at your credit scores. The various loans in which credit score plays an important role are car and auto loans, mortgages, personal loans, student loans, credit cards, etc.
The lender will look at your credit score before approving your loan to ensure that you repay your loan amount on time. The interest rate that the lender charges you is also based on your credit score. All the factors are equally considered. If your credit score is good, then you will easily qualify for the loan at a lower
The landlords may ask you about your credit score before giving you a house on rent. Thus, it is very important to maintain a good credit score, as it is required in many places, as discussed above.
How are credit scores calculated?
The calculation of credit scores is done by evaluating your credit report. It contains information from three different areas that are Equifax, Experian, and TransUnion. The credit reposts cover different information, such as your payment history, etc. Now, let’s see how FICO breaks down the credit score.
Payment history is a major factor determining your credit score, whether you pay on time or not. This shows whether you are able to repay the borrowed amount of money to the lender on time or not.
If a person maxes out his credit card every month, then the amount he owes is high. This shows that there is a lot of debt on the borrower, and he is unable to pay the amount back on time.
This means for how much time you had credit on yourself. The period under which you had debt over you is called the length of your credit history. Moreover, if you are a student, your credit history will be too long.
When a person applies for a loan or a new credit card, your credit score may fall suddenly. But if you keep on payment on time, you can manage it properly, and your credit score may increase eventually over time.
This is the variety of credits that you have. This shows that you can handle different accounts.
It also includes all these factors mentioned above, but they are weighted differently and have different names.
How to increase your credit score?
If someone has a lower credit score, it may be due to so many reasons. Improving your credit score depends on some factors. These are discussed below.
If you don’t pay your payment on time, it may lead to a decrease in your credit score. Late payments or other loan defaults will make your credit score low. The proof of your regular on-time payment shows the lenders that you can repay the borrowed amount. Thus, you get easily approved for getting a loan by the lender.
If you’re using too much credit
If you’ve borrowed too much credit and the credit utilisation ratio is high, then your credit score falls. You should keep your utilisation below 30%.
Not having long enough credit history
If you’re new and borrowing money for the first time, you must diversify your credit file. This can be done by applying for new lines of credit, such as credit cards. Thus, having more lines of credit will help boost your credit score.
How to find the credit score?
You can get to know about your credit score because most banks check the credit scores every month for free.
There are many credit card issuers that provide free credit score monitoring services. So they can get to know your credit score from them also.
You can also open a mint account. It is free of cost.
You can also get a free update about your credit score from bureaus like Equifax, TransUnion, etc.
Here, you can get your Experian credit report and the FICO credit report for free.
What are airline credit cards?
Airline credit cards are those credit cards that provide users with points or miles when they use a particular airline frequently. These points or miles can be redeemed later and can be used with the same airline for travel purposes.
How do airline credit cards work?
Airline credit cards can be used to book flights on a partner airline as well as the same airline that has provided the points. However, these credit cards are not very flexible. In most cases, you can only earn rewards through this card, and these points can later be redeemed for free flights.
Some airline credit cards also offer different types of bonuses in different categories like restaurants, grocery stores, etc.
What do experts say about these cards?
Airline credit cards are very helpful for those people who travel a lot. But some people use these cards when they don’t actually require it. A person who does not travel frequently will be served better with a travel credit card, which will help him to earn rewards that, at a later date, can be used in airlines.
The person who travels frequently gets good deals by using airline credit cards only. It has been said that only those travellers should use an airline credit card who are loyal to a single airline brand. So, if you’re loyal to a single airline, then you should consider a card with rewards that are specific to that particular airline.
For example, if you have a cash-back card and you want to start travelling, depending on the airlines you want to travel with, you can choose an airline credit card.
A travel credit card allows you to earn rewards and apply them at a place, whereas airline credit cards are good when you want to cut down your expenses on travelling with your favourite airline.
Who should get an airline credit card?
Airline credit cards are the best for those people who travel very frequently with only a single airline. The people who use airlines frequently can take various advantages such as access to the airport lounge, early boarding, etc.
If the person is not loyal to a single airline, then using airline credit cards might not be a good option. Instead of an airline credit card, other cards such as travel cards, cash-back credit cards or business credit cards can be used.
You get many benefits such as prior boarding, inflight discounts, etc.
You also get travel benefits like access to the airport lounge or global entry.
The people with airline credit cards have to pay low companion fares.
Welcome bonuses are also given to people using airline credit cards.
There are very limited options to redeem the points that you have earned.
They charge you a high annual fee, which sometimes is greater than all the benefits combined that you get from the credit card.
As discussed earlier, you have to fly with a single airline, which only means you have to be loyal to a single airline. Thus, there are limited options for you to choose from.
How do we maximise the rewards?
In order to get the most out of your airline credit card, you have to convert your rewards into future flights. It is important to look for future flights early because they disappear 10 to 11 months before the actual flight date. You have to use your card at such a place where it earns the most.
Choosing the right airline credit card?
If you travel with a specific airline, then you should look at their features and the benefits they provide you and then choose a card accordingly. If you go for an airline credit card that has annual fees, you should choose that card only if the benefits provided by that card are greater than the annual fee.
Alternatives to airline credit cards?
If you don’t choose a single airline for your travel purposes, then it is the best option to choose a travel credit card over an airline credit card. Examples of travel credit cards are The Platinum Card from American Express and many more. These cards offer rewards on travel purchases, which can be redeemed and used later for travel purposes.
Conclusion
In this article, we first studied credit score and its importance. We also looked at methods to calculate credit scores and how credit score works. Also it is very important to maintain a good credit score. This will help you in getting credit card and different loans such as home loan or a car loan etc.
Then, we looked at airline credit cards and how they are useful to people. An airline credit card is beneficial for those who are loyal towards a single airline. After this, we discussed the advantages and disadvantages of airline credit cards along with the alternatives to these cards. A travel credit card is a good alternative to an airline credit card.
