credit mistake, by correcting your behavior, you will see your score rise again soon after a drop.
FICO: 30% | VantageScore: 20%
The amount of credit that you are currently using is the next greatest factor in your credit score. Lenders look at the total amount you owe on each of your accounts compared to your credit limit, and the total that you owe overall compared to your overall credit limit. It’s called your credit utilization ratio. If you owe $100 and you have $1,000 in available credit, that means your ratio is 10%. Keep your debt as close to 0% as possible. Revolving debt, including credit cards, is an especially important consideration in this portion of your score.
Length of credit history
FICO: 15% | VantageScore: 21%
Scoring models consider the newest, oldest and average ages of your credit accounts and their recent activity. Whether it’s for payment history or credit history, time is a key player (and double-edged sword) in reaching an excellent score. But how much time is needed? According to Experian data, the average FICO score increased by 10-30 points for each 10-year age range below the age of 80 – scores quickly picked up in the average person’s 30s and made the biggest jump in their 50s-60s. Thankfully, you don’t have to have decades of experience under your belt to achieve an excellent credit score. Experian notes that of the small population with a perfect 850 FICO score, only 4% are millennials, a number which jumps to 25% for Generation X.
The types of accounts under your name get a smaller amount of weighting in your score. FICO and VantageScore give higher scores to consumers who have a diversity of credit, usually a mix of revolving credit (like credit cards) and installment loans (like mortgages). While FICO keeps this factor separate, VantageScore weighs this factor in credit history. To bump your score into the excellent range, you should make sure you have multiple types of well-managed credit in your credit history.
FICO: 10% | VantageScore: 5%
Your number of recent credit inquiries and new accounts are small factors in both your FICO score and VantageScore. This factor is labeled as “recent credit” by VantageScore. You should be careful about applying for new credit cards. Make sure you qualify before you apply, as these “hard inquiries” show up on your credit report and temporarily ding your score by a few points. “Soft” inquiries (inquiries you did not initiate by a credit application) do not count. To nudge your score up, you should be careful not to open too many new accounts or apply for a lot of cards in a brief period.
Balances (VantageScore only)
The total debt you owe isn’t nearly as important as how much of your credit you are utilizing, but lenders do look at the balances that you owe on all your accounts. It has a moderately influential weight in the VantageScore model. In general, you should try to minimize your account balances to increase your credit score and decrease interest.
Available credit (VantageScore only)
For VantageScore specifically, your amount of available credit is ranked as a “less influential” factor, but we’ve found a good supply of available credit can keep your credit all-around healthier.
Credit card perks you can earn if you have excellent credit
- Rewards: While even cards that accept bad credit can offer rewards, the rewards steadily improve as your credit improves and you qualify for better cards. Sign-up bonuses are higher and ongoing rewards can earn you hundreds of dollars a year if you use them correctly.
- Benefits: Benefits for the cardholder with excellent credit can include access to airport lounges, annual credits for travel, travel fees and even shopping at exclusive retailers. There can also be numerous shopping and travel benefits such as extended warranties and car rental insurance.
- Types of cards: With good to excellent credit, your options open up considerably to include cards with 0%, loyalty cards like airline and hotel cards, business cards, even luxury cards with exceptional benefits.
- Interest rates: There are a few things you should do once you achieve excellent credit, including doing a loan check to see if you can get better rates, including calling your card issuers.
- Higher available credit: Also, a better credit score can get you higher credit limits, which not only give you access to more money, but also can improve your score further by lowering your credit utilization ratio.
The advantages to having excellent credit are numerous, from superior rewards and welcome bonuses to convenient benefits that can save you time and hassle. There are also some advantages that may not have occurred to you, such as being able to get a credit limit increase.
How to compare similar credit cards
Here is a comparison of two seemingly similar credit cards that are both designed for people with excellent credit. However, once we break down the details on different spending categories and other features, one card in the comparison may become the frontrunner to certain cardholders. When comparing two credit cards, look out for details like rewards rates, other hidden benefits, annual fee, intro and ongoing APRs, other fees, and more. We break down rewards comparisons below:
Comparison of Sapphire Preferred vs. Venture Rewards…
|Card||Sign-up bonus||Travel and restaurants||Other ongoing rewards||Annual fee||Total end of first year|
|Chase Sapphire Preferred||**60,000 pts*125%=$750||$1,000*2X pts*12 mths*125%=$300||$1,000*1X pts*12 mths*125%=$150||$95||$1105|
|Capital One Venture Rewards||^^60,000 miles=$600||$1,000*2X miles*12 mths=$240||$1,000*2X miles*12 mths=$240||$95||$985|
**60,000 points after a $4,000 spend within the first 3 months
^^60,000 miles after a $3,000 spend within the first 3 months
Here’s what you’d have to spend each month to fully take advantage of these cards’ welcome bonuses. As you can see, for heavy spenders, both cards provide an excellent first-year value, although the Chase Sapphire Preferred offers slightly more value due to the boost provided by redeeming through the Chase Ultimate Rewards portal.
How many people have excellent credit?
Experian, one of the three major credit bureaus, has found that the average consumer’s score reached 701 in June 2020. It’s a slight dip from Experian June 2020 figures
Fortunately, this stumble could be temporary since FICO’s September 2019 data shows that more people are scoring higher, and there has been a yearly average credit score increase since that 2009 low. FICO attributed much of this improvement on strong economic growth since the Great Recession and an increased awareness of scores and active credit building among consumers.
Expert tips to maintain excellent credit
Freeze your credit reports. It’s now free – and advisable – to avoid trying to get your old debt removed from your credit reports once they have been paid off. When you’ve paid the bill off, that actually benefits your credit.
Apply for loans in a short amount of time. FICO scoring models only count up to 3 loan inquiries as one when they are made in a short period of time, as little as 14 days and as much as 45 days. This includes mortgages, student loans and auto loans but not credit cards.
Consolidate balances. Credit expert John Ulzheimer notes that when you carry small balances, it’s best to consolidate them “because you’re penalized for having too many accounts with a balance. It’s better to have fewer accounts with a balance than more accounts. So to the extent you can use fewer cards for the same purchases, the better you’ll be.”
Plan out loans. Strategize several months out before taking out auto loans or mortgages so that you don’t have large balances on your cards and you don’t take out new cards.
Follow the 20/10 Rule. Wells Fargo advises that you not let your card debt exceed more than 20% of your total yearly income after taxes, and that you not have more than 10% of your monthly take-数字货币交易软件_数字货币手机app下载home pay in credit card payments.
Notify your bank of a move. Wells Fargo also advises that you make sure you notify your card issuers and other lenders of address or email changes so that you get your statement in a timely manner.
Stay in touch with creditors. If you are late on a payment, or can’t pay, reach out to your creditor and see what alternative payment plans they might offer. Sometimes just calling and negotiating can lead to better terms.
What missteps do people with excellent credit make?
If you have excellent credit, you likely already have solid credit card habits. Here are a few key things to remember that can take you over the top as a cardholder:
- By failing to put someone you trust on your card as an ized user, you are missing out on rewards you can get through their spending.
- If you aren’t reviewing what’s on the market periodically, new rewards cards that suit your lifestyle may be passing you by.
- By keeping a card that doesn’t serve your needs, like a card with an annual fee that you don’t really use, you’re not taking full advantage of your excellent credit. If it’s an older card that you want to keep to continue to build your credit, you can ask for the annual fee to be waived, or you can ask for the card to be downgraded to a no annual fee card.
- There’s nothing in the credit rule book that says mortgage payments or student loans are more important to your credit than card debt. Everything matters, and you need to be sure to pay everything on time, every time. One missed payment can quickly drop your score.
- Don’t make sudden changes such as suddenly paying less or charging more, says Bankrate. That can indicate to your card issuer that you are having credit issues.