This post is in partnership with Lexington Law, thank you for supporting brands who support TCM. As always, all thoughts, opinions, experience, and advice is my own.
A couple of weeks ago I shared all about the different ways credit impacts your life. At the end of the post I challenged you to visit credit.com and check your credit score, did you do it?!? How did you compare to the average score of Americans?! If you haven't I highly suggest you do now! Since today I'm breaking down the habits of people with excellent credit. I'm not just talking about the folks with over a 750 credit score, but the elusive unicorns who manage to stay in the 800+ range with their credit scores! A sweet spot I've been in for about five years now so I'm really excited to share what's worked for me personally over the years. If you don't fall in that range, this is a great time to look at what they're doing versus what you're doing.
9 Habits Of People With 800+ Credit Scores
Pay their bills on time
Paying your bills on time is the heaviest weighted factor for your credit score. If you're living within your means, it's also the easiest way to move your score up and keep it there. FICO (usually the most popular of all the types of credit scores you have – you actually have 3 scores! Read more about FICO scores here) did a review of consumer profiles for those in the excellent range and found that 72% of those with a 750-799 credit score and 95% of those with an 800 or higher score had no late payments on their credit reports (which date back seven to ten years)¹. If you're nervous about remembering to pay your bills on time, set up a regular recurring deposit for your typically monthly minimum at the very least; that way you'll always pay something even if you forget.
Keep balances low
There has been a lot of research over the years about the typical monthly balance for people in the “excellent” range of credit compared to everyone else. In general, people with excellent credit scores tend to have a monthly balance of about $1,000-1,500 whereas people with lower credit scores tend to be at least $1,000 above that. Regardless of hitting a “target” number, from my personal experience, I'd recommend focusing on only charge what you can pay off in full every month (since it's a myth that keeping a small outstanding balance will help you move into the excellent range; check out more money myths here) and keeping your credit utilization ratio below 10%.
Keep an eye on credit utilization ratio
Your credit utilization ratio is one of the heavier weighted factors that makes up your credit score. It's also one of the easiest to manage if you're aware of it. Essentially, a good rule of thumb is keeping your credit utilization ratio below 30%. Meaning if you have an overall credit limit of $10,000, you won't want to charge more than $3,000 per month to keep that credit utilization ratio down. If you find yourself going over that 30% marker, consider paying your bill before it's actually due.
Now with that said, you are here because you want to be a high achiever. You aren't looking for the general rule of thumb that'll get your to a good credit score. What FICO found amongst consumers profiles in the “excellent” range, is that those with a 750-799 credit score typically stayed around a 10% credit utilization ratio. Those with over 800 scores typically only used 4% of the credit available to them¹. Personally, I recommend getting into the habit of either paying off your balance weekly or bi-weekly to keep this low if you tend to spend a lot. That way whatever is reported at the end of the month of your statement will be a lot lower.
For more information on your credit utilization ratio, check out this post from Lexington Law.
Rarely close cards
People with 800+ credit scores aren't the ones with 20 credit cards usually. They are the ones who made wise choices when applying for each new credit card and understand that in order to maintain a higher credit utilization ratio keeping those cards open and active (even if you're just charging gas once every few months to the card and paying it off) is one way to get above 800. Typically, the only time you'd want to close a card is if you're paying a high annual fee and it's just not worth it for the rewards and benefits.
Monitor scores and reports
Once you understand how your credit score works, it becomes easier and easier to stay in the excellent range. You also will be far less likely to have a panic attack every time you check your credit score or report. One of the easiest ways to move yourself to an 800 or higher credit score is by regularly checking your score and reports for any mistakes or issues. You'll also be able to start learning and understanding exactly how it all works, as you see the drops from hard inquiries, or rises from things aging off. Lexington Law Firm also recommends monitoring your credit reports and scores even if you don't use credit scores, read why here.
They avoid hard inquiries
While it can be tempting to open up all of the store credit cards when you hear things like “25% of your purchase today!” Especially if you're standing there with $400 worth of items. Take a moment and really think the decision through. When was the last time a lender checked your credit score? Is this going to be a significant savings? When will you need to pull or show your credit score again? In most cases, it's a bad idea to run around town applying for various credit cards just for quick perks and rewards.
Every time you you apply for a credit card it acts as a hard inquiry. Every hard inquiry can drive your score down. Similarly, if you're shopping for a car that you'll need a loan for, every time you visit a new dealer checks your score when you go to test drive a card, that could be hitting you with a hard inquiry. Be smart and ask questions before allowing someone to run a credit check on you. If inquiries still feel overwhelming, check out this article on the difference between soft vs. hard inquiries.
Make wise choices when applying
Resist the urge to apply for new cards or lines of credit whenever the offer is enticing enough. Instead, focus on doing some research about the best options for your lifestyle that you could get approved for, and apply for that. People with excellent credit scores are cautious of applying for new impulse cards just for the opening bonus. Instead think about both the benefits of applying for such things, and what they'll cost you.
For example, if you have a score that's in the high 700s with plans in the near future to buy a home or get a big loan or something similar but you decide to apply for a new credit card, it could drop you as much as 100 points! The hard inquiry impacted is weighted depending on what range you fall in with your credit score, and how recently it was done. So think through what the cost versus benefits truly are before moving forward.
Length of credit history is a factor in your overall credit score. While it's not weighed as much as some of the other factors, it's still a strong percentage of your score. People with excellent credit know this. People with 800+ credit scores understand the simple intricacies of what this means: you want to keep your oldest account open and active. If you got a credit card when you turned 18 years-old, great! Don't fear that account (even if you've wrecked it). Instead pay it off, and then set up a simple recurring subscription on that card and maybe never use it for anything else.
For example: my first credit card was at 18-years old. It has no real “perks” or rewards. With time, I've branched out to other types of cards that make more sense for my overall lifestyle. However, since that's my oldest line of credit, I put my monthly Netflix subscription on it. This way the account stays “active;” if you have no activity on a card for six+ months it can be marked as inactive and stops factoring into your credit score. By the card staying “active” I get the benefits of a longer credit history and a little more cushion factored into my credit utilization ratio.
Ask for help
There are no stupid questions. People who have made it to and stayed in the 800+ credit score range know they need to ask for help and ask lots of questions. For most of us, this isn't something we learned in school so there's no shame in hiring credit repair professionals like Lexington Law Firm to help you get your credit score to where you want it to be and learn about the entire process.
Lexington Law Firm specializes in removing negative items from your credit report. This can allow you to see progress much quicker than waiting the seven+ years for the items to age off. They can answer your questions throughout the repair process too. This way you can learn from your mistakes and never get back into the situation again. You can call for your free credit repair consultation here. It's a small investment upfront for long terms benefits.
So how did you compare to the habits of people with 800+ credit scores?
Do you see where you can make improvements?
¹ FICO Stats.