Skip to headerSkip to main contentSkip to footer
Get our Free E-newslettersGet our Free E-newsletters
Kiplinger logoLink to homepage
Get our Free E-newslettersGet our Free E-newsletters
Subscribe to Kiplinger
Subscribe to Kiplinger
Save up to 76%
Subscribe
Subscribe to Kiplinger
  • Store
  • Home
  • Investing
  • Retirement
  • Taxes
  • Personal Finance
  • Your Business
  • Wealth Creation
    • Podcasts
    • Economic Outlooks
    • Tools
    • Kiplinger's Personal Finance Magazine
    • The Kiplinger Letter
    • The Kiplinger Tax Letter
    • Kiplinger's Investing for Income
    • Kiplinger's Retirement Report
    • Store
    • Manage My E-Newsletters
    • My Subscriptions
Skip advert
  • Home
  • personal finance
  • credit & debt
  • loans
  • credit score
credit score

7 Habits of People With Excellent Credit Scores

Want to improve your credit score?

by: Lisa Gerstner
March 12, 2020
photo illustration of budgeting

iStockphoto

Skip advert

Want to improve your credit score? Take a page from the best. People with excellent scores know that following a few basic rules is the key to success. Adopting their habits could boost your score into the stratosphere, opening the door to the best interest rates and terms on loans. And capturing the lowest loan rates can save you a bundle of money in the long run.

The two big consumer credit scoring companies are FICO, whose scores are most commonly used in lending decisions, and VantageScore, a company created by the three major credit bureaus (Equifax, Experian and TransUnion) whose scores have been gaining ground among lenders. The latest models of both scores operate on a scale of 300 to 850. Generally, a score of 750 or higher is considered excellent.

Once you know your score, you can start taking steps to raise it by following these seven habits of people with excellent credit scores.

  • 45 Smart Financial Moves You Can Make in an Hour or Less This Weekend
Skip advert
Skip advert
Skip advert

1 of 7

They Pay Bills on Time

photo illustration of pay bills on time

iStockphoto

Skip advert
  • The most influential factor in your credit score is your payment history, so staying on top of bills is crucial. Just one late payment (overdue by 30 days or more) can damage your score. FICO recently reviewed the profiles of consumers it calls high achievers (those with scores higher than 795) and found that 96% of them had no late payments on their credit reports.

To ensure that you pay bills on time, consider signing up for automatic payments from your bank account or credit card. Or set up reminders of upcoming due dates on your smartphone (or mark your paper calendar), suggests Heather Battison, vice president of TransUnion. Budgeting site Mint.com can also alert you when bills are coming due for accounts you link to its tool.

TAKE OUR QUIZ: Will It Sink Your Credit Score?

Skip advert
Skip advert
Skip advert

2 of 7

They Watch Their "Utilization Ratio"

photo illustration of $100 bill

iStockphoto

Skip advert

The amount you owe on your credit cards as a proportion of your card limits—known as your credit utilization ratio—is another important score component. FICO high achievers with scores higher than 795 use an average 7% of the credit available to them. There are no hard-and-fast rules to pinpoint the optimum ratio, says Can Arkali, principal scientist at FICO. But in general, the lower your utilization, the better. As a guideline, experts often recommend using no more than 30% of the credit available to you to show lenders that you can manage credit responsibly. But if raising your credit score is a priority, keep utilization under 10% on each credit card you have, says Beverly Harzog, consumer credit expert and author of The Debt Escape Plan.

  • Paying down your credit card balances multiple times per month can help keep your utilization down, says Jeanine Skowronski, managing editor at Credit.com. Your card issuer may allow you to set up e-mail or text message notifications when your balance reaches a level that you specify. Another tactic: Ask your card issuer to raise your credit limit. If you've been using the card for several months and paying your bills on time, the issuer may grant your request. But be sure that you have the discipline not to increase your spending, too, cautions Harzog.

Even if you stop using a credit card, it's often smart to keep it open so your score benefits from the available credit. However, if the card tempts you to overspend or carries an annual fee, closing it may be better.

Skip advert
Skip advert
Skip advert

3 of 7

Keep Balances Low

photo illustration of low credit balance

iStockphoto

Skip advert

People with FICO scores higher than 795 owe less than $4,000 on their credit cards, compared with average balances higher than $6,000 for those with scores lower than 635.

The takeaway? Maintain firm control over your spending, charging only what you can afford to pay in full each month on your credit cards. That way, you'll also avoid incurring interest, which can quickly pile up.

 

  • 9 Secrets to Better Credit
Skip advert
Skip advert
Skip advert

4 of 7

Give It Time

photo illustration of retiree

iStockphoto

Skip advert

Having several years of credit usage under your belt also elevates your score. The average age of revolving credit accounts among FICO high achievers is about 12 years, and the average high achiever's oldest account was opened 27 years ago. That may give older folks a leg up, but "it's important to note that you can still have a good score even if you're not a longtime user of credit," says Skowronski. Length of credit history accounts for 15% of your FICO score, compared with 35% for payment history and 30% for amounts owed (including credit utilization). If you are just starting to establish a credit history, set yourself up for success by using a credit card to make small, manageable purchases, such as gas and groceries, says Battison. She also suggests that renters ask their landlords to report rent payments to the credit bureaus to help start a credit history.

Opening new credit accounts may shorten the average age of your credit history, but closing accounts won't affect account age right away. Accounts that were closed in good standing may remain on your credit report for up to 10 years. Still, it's not a bad idea to keep your oldest credit cards open to help maintain your credit history.

Skip advert
Skip advert
Skip advert

5 of 7

Apply for Credit Sparingly

photo illustration of applying for credit card

iStockphoto

Skip advert

Applying for several credit cards in a short period sends a signal that you may be a risky credit prospect. Each time a potential lender checks your credit, the action shows up on your report as an "inquiry" -- and the appearance of several inquiries at once can ding your credit score. (If you're shopping for a mortgage, auto loan or student loan, however, FICO ignores all inquiries that such lenders have made within the past 30 days. VantageScore counts auto loan and mortgage inquiries made within two weeks of one another as a single inquiry.)

Having a mix of account types helps increase your score. If you do open new credit cards regularly, Harzog recommends waiting at least six months between applications.

TAKE OUR QUIZ: The Truth About Credit and Debt

Skip advert
Skip advert
Skip advert

6 of 7

Choose the Right Credit Cards

photo illustration of credit cards

iStockphoto

Skip advert
  • Look for cards that reward your spending patterns. If you buy a lot of gas, for example, a card that pays 5% cash back on fuel purchases will serve you well. Cash-back cards often let you use the rewards you've accumulated as a statement credit toward purchases, lowering your bill. A card that carries an annual fee may be worthwhile, but first do the math to decide whether the rewards you earn will outweigh the fee. Some cards waive the annual fee for the first year, giving you time to determine whether the card works for you.

If you are just getting started with credit (or bouncing back from a bankruptcy or other serious delinquency), a secured card, which requires you to make a deposit as collateral, can help you build a credit history and score. Retailers may offer you enticing discounts if you sign up for their store credit cards, and retail cards are often easier to obtain than other cards. But keep in mind that both cards often come with low credit limits—meaning that your credit utilization could easily push past the recommended 30% mark when you use the card to make purchases.

 

  • The Best Rewards Credit Cards, 2019
Skip advert
Skip advert
Skip advert

7 of 7

Monitor Your Scores and Credit Reports

photo illustration of credit monitoring

iStockphoto

Skip advert
  • By keeping an eye on your credit report and score, you will be aware of any negative changes that pop up and can act quickly to correct them. According to a survey from credit card issuer Discover, 76% of those who had checked their credit score at least seven times in the past year saw their score improve, compared with 38% of those who had checked their score once in the previous year.

At AnnualCreditReport.com, you're entitled to a free yearly credit report from each of the three major credit agencies: Equifax, Experian and TransUnion. Scan each report, looking for possible errors or signs of fraudulent activity, such as an incorrect credit limit on a card or an account that you never opened. (If you spot a problem, you can take steps to dispute and correct it. If you suspect fraud, you should also take measures, such as enacting a fraud alert.)

A host of other websites also offer free credit scores to help you gauge where you stand. One of our favorites: CreditKarma.com, where you can view information from both your Equifax and TransUnion credit reports as well as your VantageScore from each bureau. Credit Karma also lets you sign up for alerts of changes in your TransUnion credit report. Discover Credit Scorecard offers a free FICO score (based on data from your Experian credit report) to everyone, not just Discover card customers. Your bank or credit card issuer may provide customers with free credit score updates, too.

TAKE OUR QUIZ: How to Get Out of Debt

Skip advert
Skip advert
Skip advert
  • credit cards
  • debt management
  • loans
  • refinancing
  • credit reports
  • credit score
Share via EmailShare on FacebookShare on TwitterShare on LinkedIn
Skip advert
Skip advert
Skip advert
Skip advert

Recommended

Using a Credit Card Travel Portal
credit cards

Using a Credit Card Travel Portal

Short monthly "Credit & Yields," will link to Best Rewards Credit Cards.
May 26, 2022
7 Money-Smart Ways to Spend Your Tax Refund
Tax Breaks

7 Money-Smart Ways to Spend Your Tax Refund

Nearly 60% of taxpayers expect a refund this year, and many will receive a larger amount.
April 22, 2022
The Best Rewards Credit Cards for You, 2022
rewards credit cards

The Best Rewards Credit Cards for You, 2022

Our top picks offer cash back, miles or points you can use to buy groceries or gas, pay for travel or boost savings.
April 20, 2022
Free Credit Monitoring for Equifax Breach Victims
credit reports

Free Credit Monitoring for Equifax Breach Victims

Millions of consumers whose data may have been exposed have been notified to sign up for the monitoring service.
March 17, 2022

Most Popular

Why Are Gas Prices Still Going Up?
spending

Why Are Gas Prices Still Going Up?

The cost of a gallon of gas is heading back toward its March highs. What’s driving the resurgence, and will gas prices go down anytime soon?
May 23, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
Retirement Income Shouldn’t Depend on the Market; It Should Depend on Math
retirement planning

Retirement Income Shouldn’t Depend on the Market; It Should Depend on Math

The math isn’t as tough as you might think. It all starts with dividing your assets into three different buckets.
May 23, 2022
  • Customer Service
  • About Us
  • Advertise With Us (PDF)
  • Privacy Policy
  • Cookie Policy
  • Kiplinger Careers
  • Accessibility
  • Privacy Preferences

Subscribe to Kiplinger's Personal Finance

Be a smarter, better informed investor.
Save up to 76%Subscribe to Kiplinger's Personal Finance
Do Not Sell My Information

Kiplinger is part of Future plc, an international media group and leading digital publisher. Visit our corporate site www.futureplc.com
© Future US LLC, 10th floor, 1100 13th Street NW, Washington, DC 20005. All rights reserved.

Follow us on InstagramFollow us on FacebookFollow us on TwitterConnect on LinkedInConnect on YouTube