If you have an excellent credit score, you’re surely enjoying the perks of being in the credit elite. You’ve likely done just about everything right and now you’re rocking a score that shows off your hard work. But with excellent credit comes great responsibility, and maintaining it is as important as getting to a great score in the first place. Here’s how to stay excellent!
What is excellent credit?
The traditional FICO credit scoring system ranges from 300-850, with the former being the worst possible score and the latter being the best. An excellent score is generally defined as a score of 720 or higher, but this could vary from lender to lender. Anything in the excellent range will get you the best terms on credit accounts—meaning you don’t have to have a perfect 850 to enjoy the perks that come with credit excellence.
The problem with excellent credit is that it can be taken away pretty easily with one credit mistake. You see, a good credit score can be derailed more quickly by a mistake than a fair score will be affected. This may seem odd, but there’s a logical explanation. If your score is excellent, you’ve done everything right. Therefore, one mistake will hit your credit hard. Those with fair scores have already made mistakes, so their score doesn’t have as far to fall.
How do I keep my excellent credit score … well, excellent?
It’s unlikely that you stumbled into a great credit score, so you likely know the basics for good credit. But here’s a refresher to keep your score high and your finances happy:
Pull your credit reports every year for free. Each year, you should go to AnnualCreditReport.com to look over all three of your credit reports. If there are any mistakes on your reports, they will be reflected in your FICO scores, so dispute any discrepancies immediately by following these five steps.
Pay your bills on time. Of course you should make your debt payments on time, but did you know that non-debt bills can also hurt your credit if they aren’t paid in a timely manner? It’s true! Nonpayment of rent, utilities and medical bills can hurt your score, although on-time payments in these categories won’t help it. Pay all of your bills on time, 100% of the time.
Keep your debt load low in relation to your credit limit. Your credit utilization—or debt balance to credit limit ratio—should never exceed 30%. Remember, balances are often reported mid-statement, so if you spend close to your limit each month, your score may suffer even if you pay the balance on the due date. Keep balances low or make multiple payments throughout the month.
Let time do its thing. The average length of credit history is a factor of your credit score improved with time and helped along by you making smart credit decisions. As a general rule, you should keep your oldest credit cards open and active and limit new credit applications as much as possible.
Have a good mix of accounts. While this ranks lower on the list of score factors, it helps your credit if you keep a mix of different types of credit accounts. For example, having credit cards, a mortgage, and one or two very low interest loans can give your credit a boost in a way that only having credit cards can’t.
Keep new card applications to a minimum. Each time you get a new credit account, you’ll suffer a small credit score drop known as the “new credit penalty.” To limit this, make sure you’re evaluating new cards carefully before applying. Here are a few of our favorite credit cards to get you started.
Bottom line: One mistake can derail your score pretty quickly, so continue to practice responsible credit habits. To keep your credit score excellent—that is, between 720 and 850—check your credit reports annually, pay your bills on time, keep credit utilization low, be patient, keep a mix of accounts and don’t apply for too many new credit accounts in a short period of time.
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