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Excellent Credit Scores
How can you kick your credit score up a notch?
Are you looking to take your credit score to the next level but not sure how to do it? Just look at the practices of people with excellent scores. The way they manage bills, debt and credit over time pushes their scores into the upper echelons and wins them the best credit terms.
Lenders use scores, derived from information in your credit reports, to assess the likelihood that you’ll repay them. The widely used FICO® Score, for instance, ranges from 300 to 850 –[BC1] [BC1] the higher the number the better. Only 1.2% of consumers have a perfect FICO® score. But the more encouraging statistic is that 21% have the next best thing: an exceptional score (800 or higher).
Even better news?
“You don’t need a perfect 850 to get the best terms,” says Ted Rossman, credit card industry analyst with Bankrate.com. In fact, Rossman says that a borrower with a 760 FICO® Score, considered “very good,” can get the same low interest rate on a mortgage loan as someone with a perfect score.
The takeaway: You don’t need to aim for perfection. But depending on where you fall among the different scoring ranges, you could save money and gain more credit options by improving your score.
Here are six ways elite scorers earn their high numbers.
1. They Pay Bills on Time – All the Time
The highest scorers take their bills seriously, says credit expert John Ulzheimer, formerly of FICO® and Equifax, a major credit reporting company. “It’s like flossing. Some people never miss a night,” he says. Top scorers “never miss a payment, no matter what.”
At FICO®, payment history comprises the largest portion of your score – 35%.
That’s not to say you can’t achieve an excellent score if you pay your credit card bill a day or two late. You’ll likely owe a late fee, but a tardy payment won’t show up on your credit report until you’re 30 days past the due date.
But if you are 30 days late, that is a black mark, and it’s one that can affect your score for years. Negative information will stay on your report for seven years (10 years for a Chapter 7 bankruptcy).
2. They Keep ”Credit Utilization” Below 10% People with excellent scores don’t max out credit cards or even get close to doing so. Instead, they only use a small percentage of their available credit – a number known as the “credit utilization ratio.”
According to credit reporting company Experian, consumers with exceptional scores have an average credit utilization ratio of 5.7%, while those with good scores use up nearly 33% of their available credit. To make it to the top tier, keep your utilization ratio under 10%.
Be aware, you can have a high utilization rate even if you pay your balance off each month, Rossman says. That’s because utilization is calculated as of the statement date, so any outstanding balance at that point determines your rate.
How can you lower your utilization ratio? By paying down your credit card balance every two weeks, instead of once a month, Rossman says. Or you can ask your card issuer to raise your credit limit.
Your amount of debt, which includes credit utilization, accounts for 30% of your FICO® Score. Lowering credit utilization is one of the quickest ways to improve your score.
“Paying your bills on time is super important, but it’s a marathon, not a sprint,” Rossman says. “Something you can change right away is your credit utilization ratio.”
3. They Optimize the Average Age of their Accounts
Lenders and credit scoring systems like to see a lengthy track record of managing credit well; it accounts for 15% of a FICO® Score. Consumers of all ages can have healthy scores, but top scorers have credit experience that’s at least two decades old, according to Ulzheimer.
Credit scoring considers the average age of your credit accounts and the age of your oldest one. Opening new credit accounts can lower your score. “It’s simple math. The more new accounts you stick on your credit reports, the younger the average age [is],” Ulzheimer says.
That doesn’t mean you should keep an old credit card that you don’t use or that charges a high annual fee. Instead, ask the card issuer for a “product change,” which allows you to swap your current card for a more favorable one offered by the same issuer, Rossman suggests. Your new card will preserve your credit history and credit limit, and the switch won’t affect your score.
4. They Apply for Credit Infrequently
When you apply for credit card or a loan, a lender will pull your credit report. This is called a “hard inquiry,” or “hard pull,” which usually dings your score. And several hard inquiries over a short period can make you appear to be a credit risk. New credit makes up 10% of your FICO® Score.
A hard inquiry remains on your credit report for two years, although it may only affect your score for a year. Rossman recommends spreading out your credit applications to, say, once every six months.
Exceptions to this rule:
5. They Have a Mix of Credit
Lenders and scoring systems also like to see that consumers can manage a variety of credit. That includes revolving credit, such as credit cards, and installment credit, such as a mortgage, auto and student loans.
This doesn’t mean you should open accounts you don’t need to improve your mix. It accounts for only 10% of your FICO® Score. You can still get an excellent score without a variety of credit, Ulzheimer says.
6. They Monitor Their Credit
In its annual Credit Health survey, card issuer Discover found that people who regularly check their credit scores are more likely to take steps to improve it. And consumers who reviewed their score at least once a month were twice as likely to report an improvement compared with those who checked only once a year.
In addition to keeping tabs on their credit score, consumers should also check their credit report for errors. For example, your credit report might contain a collection action against another consumer who shares your name. Correcting errors is another way to boost a score.
Fortunately, banks, card issuers and credit reporting companies often offer scores or credit reports for free. You can also get a free copy of your report from each of the three major reporting companies at AnnualCreditReport.com. These free reports are available weekly until April 20, 2022, and then annually thereafter.
It takes effort to improve your credit score, but it’s time well spent. Keep these practices of elite scorers in mind and over time you, too, may join them.
Don’t fall for these common myths [BC1] and misunderstandings about credit scores.
 The Elusive 850: Experian Reveals Traits of Consumers With Perfect Scores, Experian, March 2019.
 830 Credit Score: Is it Good or Bad? Experian, 2021.
 Loan savings calculator, myFico, March 2021.
 Credit Card Debt in 2020: Balances Drop for the First Time in Eight Years, Experian, Nov. 30, 2020.
 Most People Say They Are Aware of Their Credit Standing, but Far Fewer Check Their Credit Score More Than Once a Year, Discover, June 2017.
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