By Ryan Velez
Having a strong credit score is not only an indicator of financial health but is also a gateway to many different opportunities, from getting a home to a car to starting a business of your own. However, especially if you have a history of credit issues, it can be rather difficult to get your score back to a normal state. When it doubt, try to learn from the best. Credit scorer FICO recently reviewed the profiles of what they call high achievers—those with scores in the 750-to-850 range. A recent article from The Network Journal has compiled some of these habits, as well as ways you can implement them into your financial lifestyle.
By far, the most influential factor for those with high credit scores was a consistent record of on-time bill payments. FICO’s study showed that 72% of those with scores between 750 to 799 and 95% of those with scores of 800 or higher have no late payments (overdue by 30 days or more) on their credit reports. If you find yourself struggling to pay in a timely fashion, consider signing up for automatic bill payments or putting regular reminders on your calendar.
Another key component is called the credit utilization ratio—the amount of money you owe on your credit cards as a proportion of your overall limit. High achievers with scores from 750 to 799 use a median 10% of the credit available to them, and those with scores of 800 or higher use just 4%. Keep in mind, though, that “there are no hard-and-fast rules,” says Can Arkali, principal scientist at FICO. In general, the lower the utilization, the better. Even if you don’t use a credit card, keeping it open so your score benefits can be a good idea.
Part of the reason this is so is due to the third reason, the fact that a long history of credit usage can be a net benefit to your score. In fact, the average age of revolving credit accounts among high achievers is a little more than nine years for those in the 750-to-799 range and almost 12 years for higher scorers. A good way to get yourself started on the right path without breaking the bank is using your credit card regular for small, manageable purchases like gas and groceries.