Here’s How They Did It!
There are more than 100,000 consumers in the United States with credit scores over 750. The highest possible credit score is 850. Just 1.2% of American consumers have a FICO credit score of 850.
A credit score of 800 is far more accessible than a perfect 850 score. Contrary to many people’s beliefs, you don’t have to have an above-average income to achieve a high credit score. 38% of people with a perfect credit score in 2018 had an average annual income of less than $75,0000.
According to a new report from LendingTree, there are a few things that people with credit scores over 800 have in common.
People with high credit scores pay their bills on time each month
The LendingTree report notes that paying bills on time every month is one of the solid habits that help build a high credit score. Payment history is the most important factor in a credit report that makes up a consumer’s credit score. Missing even one payment could bring a credit score down by 100 points.
People with credit scores in the neighborhood of 800 or higher never miss a payment. The average resident of one of the 100 largest metro areas in the country has six missed payments on their credit history.
People with the highest scores use a fraction of their available credit
FICO gives credit utilization percentages much weight when they calculate credit scores. People with credit scores of 800 and up use just 5.7% of their available credit each month. It’s best to keep your total credit utilization percentage across all revolving accounts well below 30% if possible.
The average consumer living in one of the nation’s 100 largest metro areas has a credit utilization rate of 16% to 33%.
People with excellent credit scores keep their accounts open for a long time
Another one of FICO’s criteria is the age of your oldest open credit account. This gives preference to people who’ve been using credit for decades. Although, many of the consumers with high credit scores included in LendingTree’s data haven’t had access to credit for more than a few years.
Among people with credit scores above 800, the average age of the oldest account was 27 years.
People with excellent credit know what’s on their credit reports
Federal law entitles everyone to a free copy of their credit reports from Experian, Equifax, and Trans Union. Until April 2022, you can get a free credit report from each of the three credit reporting bureaus as often as once per week. Visit AnnualCreditReport.com for access to your free reports.
Increasing a FICO credit score takes time. FICO updates scores once every 30 days, but they rely on information from the three credit bureaus to calculate credit scores.
There are a few things you can do to increase your score quickly:
First, make sure the lender is reporting to the credit bureaus by checking your credit reports. Paying a debt that doesn’t appear on your credit report will not boost your FICO credit score.
If you have a family member or partner with a credit card with 5+ years of on-time payments and a zero balance, ask to be added to that account as an authorized user. The account owner doesn’t have to allow you to access the account. However, adding you as an authorized user will trigger the credit card company to report the entire account history to your credit report. This could help your credit utilization ratio and boost your history of on-time payments.
A higher credit limit helps your credit utilization ratio. For example, if you carry a $200 balance on a credit card with a $400 credit limit, your credit utilization ratio is 50%. If your card issuer increases your available credit to $1,000, your credit utilization ratio automatically drops to 20%.
If you have a judgment against you due to an unpaid debt, pay it off as soon as possible. In some states, a judgment must be removed from your credit report after you pay the debt.
After a collections account is paid off, you can ask the reporting agency for a goodwill deletion. Send a letter asking the agency listed on your credit report to please delete the account. Remind them that you paid your debt and include proof that you no longer owe money on the account.
A single late payment can cause a FICO score drop of up to 110 points. If you aren’t currently paying your credit card and loan bills on time, set up a budget and use your bank’s bill pay system to ensure you never miss a payment due date.
Experian Boost may instantly raise your FICO credit score by using information about how you pay your regular bills, including your internet, phone, electric, and water bills. If you have a compatible bank account, you can connect it to the Experian Boost program for free. You can also see your FICO 8 score through Experian Boost at no charge.
When you review your credit report, watch for accounts you don’t recognize, late payments reported by mistake, incorrect account balances, or open accounts that you closed. Mistakes on your credit report could decrease your FICO credit score, so it’s crucial to open a dispute with the credit reporting agency if you find a mistake. You can dispute errors on the websites of each of the credit bureaus.
There are a few unexpected ways you could end up with an even lower credit score.
Canceling your unused credit cards eliminates available credit, which could hurt your credit scores. Unless you face a high annual fee, keep credit card accounts open. Before you close an account, contact the card issuer and ask if they’ll waive the fee.
Cosigners may make it possible for a borrower to get the credit or loan they couldn’t otherwise access. If you cosign a loan, you are just as legally for the debt as the borrower. If the borrower makes a late payment, it hurts your credit. If they default on the loan, it could ruin your credit for seven years or longer. If you cosign for someone’s apartment or condo and they don’t pay their rent, the landlord can sue you for the debt.
You can use your credit cards, but be sure to pay off the balance before the due date each month to protect your credit utilization ratio.