7 Habits Of People With Excellent Credit Scores

7 Habits Of People With Excellent Credit Scores

If you want your credit score to improve then you’ve come to the right place. One thing people with excellent scores know is that the best way to achieve success is to strictly follow some basic rules. If you imbibe these habits, you can enhance your score, paving the way for you to enjoy the best interest rates on credit cards, car loans and mortgages.

Don’t Delay In Paying Your Bills

Your payment history plays a huge role in influencing the strength of your credit score, so you should endeavor to pay your bills when due. It doesn’t take more than one late payment to put a serious dent in your credit score. According to a recent review by FICO of their high achieving customers (i.e. those whose score range between 750-850), 72% of customers whose scores are between 750-799 as well as 95% of those with 800 and above, didn’t have credit reports with a single late payment.

You can sign up for automatic payments on your credit card or bank account to help you pay your bills on time. You can also use your smartphone to set up reminders of your due dates or mark it on you calendar.

Be Mindful Of Your “Utilization Ratio”

Your credit utilization ratio, which is the amount owed on your credit card that is proportionate to your card limit – is a very essential element for your credit score. High achieving FICO customers whose scores range between 750 and 799 use a median of just 10% of their available credit, and customers who score 800 or more make use of only 4%.

It is always better to have a low utilization ratio. According to experts, you should not use more than 30% of your available credit if you want to prove to prospective lenders that you can responsibly manage credit. But if you’re set on raising your credit score, then your utilization should be below 10% on all your credit cards.

You can also maintain a low utilization by paying down the balances on your credit card several times a month. You can arrange with your card issuer to set up notification via e-mail or text whenever your balance approaches a level preset by you.

Another approach is to arrange with your card issuer to have your credit limit raised. Depending on how long you’ve been using the card and how regularly you’ve been paying your bills, the issuer might decide to grant your request. But you must ensure that you don’t increase your spending.

You should always try to keep the cards you’ve stopped using open, so that the available credit can help boost your score. However, if you’re going to be tempted to overspend, or if the card comes with an annual fee, then it might be better for you to close it.

Maintain A Low Balance

The median of the total revolving credit balance for people whose FICO scores are up to 800 or higher is $1,446, compared to that of the population of the entire U.S. (with an average score of 700) which is $2,040.

You can achieve this by keeping your spending under control, by making sure that the things you charge on your credit card are things you can afford to pay for in full every month. By so doing, you can also avoid all the interest that could have accrued.

Be Patient

It is easy to boost your credit score if you’ve used your credit card for a couple of years. The average number of years the credit cards of high achieving FICO users have existed is a little over nine years for customers in the 750-799 range and about 12 years for customers with higher scores. This gives an advantage to older users, though you can still get a high score even if you’re not an old credit user.

15% of your FICO ratings can be traced to the longevity of the history of your credit, as compared to the 35% on your payment history and the 30% for money owed (not excluding credit utilization). If you really want to establish credit history, you can start by making small payments such as purchasing gas and groceries with your credit card. If you’re a renter, you can arrange with your landlord to report payment of rent to the credit bureaus to help you establish a credit history.

Your average credit card history age might be shortened if you start a new credit account, but if you close the account it will have no immediate effect on the account age. You can maintain an account that was closed in good standing on your card report for as many as 10 years.

Nevertheless, not closing your oldest credit cards is still a good idea if you want to sustain your credit history age.

Be Frugal When Applying For Credit

The message you will be passing across if you apply for too many credit cards within a short period is that giving you credit will be risky. Whenever a potential lender goes through your credit, it is displayed on your report as “inquiry” and if there are too many inquiries within a short period of time, it can affect your credit score. (However, if the inquiry is about mortgage auto loan, or student loan shopping, FICO will ignore them, provided they were made within the past 30 days).

Your score can be boosted by having a mixture of different accounts, and if your FICO score is higher than 800, you’ll have a median of 10 revolving lines of credit on your reports, which is higher than those whose scores are lower. If you have a habit of opening credit cards frequently, you should wait for not less than six months before the next application.

Make The Right Credit Card Choice

Pick a card that favors the pattern of your spending. If for instance, you spend a lot of money on gas, you will benefit from a card that gives you 5% cash back on your fuel purchases. Most cash back cards allow you to use your accumulated rewards as a statement credit for purchases, thereby reducing your bill.

You can use secured cards that ask you to make a deposit in form of collateral, if you’re new to credit or recovering from bankruptcy or any other delinquency, in other to help your credit score and history. A lot of retailers will entice you with different discounts to sign up for their credit cards, and their cards are likely going to be easier to acquire compared to other cards. However, you should know that most times, both of these cards come equipped with low credit limits – which means it will be easy to push your credit utilization past the 30% mark that is recommended when you buy things with the card.

Keep Track Of Your Credit Reports And Scores

If you keep track of your credit score, you can easily notice any negative occurrence and act swiftly to correct it.

AnnualCreditReport.com offers you a free annual credit report from Experian, Equifax, and TransUnion, which are the three main credit agencies. Check each report for possible errors or indications of any fraudulent activity like an account not opened by you or the wrong credit limit on a card. If you notice any problem, you can take measures to correct it. If you think a fraud has been committed you can also take steps to rectify it by raising a fraud alert.  As with anything in life, being proactive and responsive can help in minimizing the damage caused.

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