You know a strong credit score is invaluable to your financial life. Want to secure the best mortgage rate? Nab that charming apartment? Pay less for your insurance premiums? Your FICO® score, the most popular score used by lenders, makes it happen.
Ranging from 300 to a perfect 850, your FICO score determines what credit is available to you and at what rate. According to NerdWallet, once you hit 760, you'll usually be offered the very best rates.
But some people can't resist the challenge of achieving a FICO score in the 800s. If you want to know how to gain – and maintain – a top–notch score, you can learn from these five habits of card-carrying members of the 800 club.
1. People with Excellent Credit Scores pay on time
Lenders want to know that you'll live up to your loan obligations, so your payment history makes up a whopping 35% of your FICO score. It's no surprise then that top scorers are serious about punctual payment. "I typically pay bills more than 3 times per month just to ensure I am never close to being late," states Bradley Smith, a Newport Beach CEO with a chart-topping score of 844.
He's not alone. People with excellent credit swear by multiple monthly payments, e-mail and text alerts for approaching due dates, and automatic bill payment. Matthew Coan, an Internet marketer in Bradenton with an 800, has an additional suggestion: "I try to make all of my due dates around the same date. This way I can pay everything at once, and don't run the risk of missing a payment."
If you do find that you've just missed a payment, take care of it ASAP. Most credit accounts allow for a short grace period before they report your missed payment to the credit bureaus.
2. People with great credit scores maintain a low credit utilization ratio
Your credit utilization ratio (CUR) is the ratio of your debt to your available credit. A high CUR could mean someone is financially overextended, while a low ratio could indicate someone will keep up with credit repayments.
The amount you owe and your credit utilization ratio account for 30% of your FICO score. And consumers with 800+ credit scores typically use only a tiny portion of their credit.
Want to achieve an ultra-low CUR? Choose one (or both!) of these options:
1. Reduce the debt you incur – even if you pay it off every month.
2. Increase your spending limits.
Sarah Jacobsson Purewal, a 30-year-old Los Angeles writer with a score of 812, recommends contacting your credit card company about bumping up your credit limits. "I'm obsessed with having tons of credit I'll never, ever use," says Purewal. "I honestly think this is what has bumped me from 'good' to 'fabulous'."
3. People with excellent credit stay on top of their reported history
If you're going to the effort of building a stellar credit history, the last thing you need is an error or fraudulent activity on your record. "I make it a habit to look at my credit card accounts online about once a week," says Kali Hawlk, a 27-year-old, Boston-based entrepreneur who's already achieved a credit score of 802. "I check to make sure all the transactions are correct and everything looks good."
In addition to giving each of their statements a close review, high scorers faithfully check their credit reports at least once a year. It costs absolutely nothing to stay on top of yours, as you're entitled by law to free annual reports from each of the three major credit reporting agencies – Equifax, Experian, and TransUnion.
Grab them all at once, or spread them out over the course of the year. "Check every part of your report, even down to prior addresses," suggests Smith. "I have a very common name, and I have found errors over the years."
Also be sure to keep an eye on your FICO score, which isn't included in the credit reports. Before you pay anything for a current score, check your recent credit card statements. Many card issuers now provide you with access to your FICO score for free.
4. People with excellent credit scores think twice before shutting down old lines of credit
The number and age of your credit lines is another important factor in your credit score. Lyn Alden, an electronics engineer from Atlantic City, has already secured a FICO score of 833 at the age of 30. She credits her success in part to a lengthy credit history that began when she became an authorized, teenage user on her father's credit card.
If your trusty, dusty old credit card is still active and doesn't charge you an annual fee, consider leaving the account open. Your credit score can reflect your tenure as a good lending risk.
5. People with great credit scores keep focused on the goal over time
Time is your friend when it comes to maximizing your credit score. Anyone can move from a checkered financial past to an excellent score. "You can rebuild. I had poor credit previously, and it can be done," states Smith.
In fact, according to Bankrate, the majority of bad marks against you fall off your credit report after 7 years. And a minor infraction along the way won't necessarily tank your score. FICO reports that a handful of people with credit scores above 800 actually do have recorded late payments.
So keep on building your healthy financial history, and watch your score climb.
Want to learn more about what your FICO score means, why it matters, and how it's calculated? Check out our two-minute FICO Score Educational Video.
Megan Nye is a personal finance freelance writer with a background in mathematics and insurance. Her writing has been published by Lending Tree, Personal Capital, The Penny Hoarder, The Huffington Post, and many other businesses and publications.