Are you trying to earn and maintain excellent credit — as in a score greater than 800? Do you want to live with the peace of mind that comes from knowing your credit can no longer hold you back from the things you want to provide for yourself and your family?
If so, then studying and copying the behaviors of people with great credit is a fantastic place to start. Here are four habits common among the top credit achievers.
1. They Never Miss a Payment
According to the creators of the FICO credit scoring system, 95% to 96% of the highest credit score achievers have zero delinquencies (a.k.a. late payments) on their credit reports.
People with great credit scores have clean credit reports, it’s that simple. Both the FICO and VantageScore scoring systems will hammer you if you mismanage your credit obligations to the point where your credit reports become polluted with derogatory information.
While this may seem rather obvious, it’s important to understand exactly what having a clean report entails. Clean credit reports are free from negative or derogatory information of any kind. Many consumers incorrectly believe that an occasional late payment here or there is no big deal. However, those with great credit almost always develop the habit of viewing late payments as completely off limits.
Other derogatory items that people with the best credit scores tend to avoid include collection accounts, charge-offs, settlements, bankruptcies, judgments, and tax liens.
If you already have derogatory information on your credit reports, the good news is it has an expiration date. Most derogatory items must be removed from your credit reports after seven to 10 years, per the Fair Credit Reporting Act. Additionally, as negative information becomes older, it will have a diminished impact upon your credit scores.
2. They Carry Low Credit Card Balances
The highest credit score achievers have an average balance-to-credit-limit percentage of 7% on their credit cards, according to FICO. That means for every $10,000 of credit limits, they’re only using $700 in the form of a balance.
There are two ways to maintain a really low usage percentage, or what’s more formally called revolving credit utilization: You can truly keep your balances low, or you can maintain really high credit limits.
Or, if you’re smart, you’ll do a combination of both. And, if you want to win across the board, you’ll maintain low balances, high credit limits, and no more than one or two cards with a balance at any given time.
3. They Only Apply for Credit Sparingly
According to FICO, the highest credit score achievers have not had any hard credit inquiries, indicating credit applications, in the last nine months. They also have not opened any new accounts within the last 15 months.
People with great credit do not allow their credit reports to be pulled often, but instead apply for credit sparingly and only when they actually need it.
Having said that, you never should be afraid to check your own credit reports, since doing so cannot damage your credit scores. This is true for both the FICO and VantageScore scoring platforms.
4. They’ve Used Credit for a Long Time
The average age of the accounts on the credit reports of the highest credit score achievers is 128 months, according to FICO — or more than 10 and a half years.
It is no secret that higher credit scores are awarded to consumers who have longer credit histories. People with great credit typically have older, more seasoned credit reports – a long history of using credit responsibly. This also means that they have a habit of not opening new lines of credit too frequently, as each new line of credit lowers the overall average age of their accounts.
This is a harder habit to emulate, of course, as you cannot control time. But it does show the benefit of beginning your relationship with credit early on if possible. And as your credit reports get older, your credit scores, both FICO and VantageScore, will improve because of nothing more than time passing.
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John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. He has written four books on the topic and has been interviewed and quoted thousands of times over the past 10 years. With time spent at Equifax and FICO, Ulzheimer is the only credit expert who actually comes from the credit industry. He has been an expert witness in over 230 credit related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit.