If you do a little research you’ll find that an excellent credit score is somewhere around a 760 on the FICO scale. The number represents what the credit bureaus consider an excellent credit risk. And that means anyone with a score that high will be offered the best interest rates and the best terms on any loan or line of credit they want to obtain.
But what goes into creating one of these scores? No one is born with a high credit score after all so there must be different credit score factors that influence it one way or another. Well, let’s take a look.
First and foremost, you must have patience to achieve a high credit score. The length of your personal credit history has a big impact on the total score. This is why young people generally have such low scores. Creditors want to see a history of your credit worthiness. They reason that the longer you’ve been handling your finances responsibly, the more likely you are to continue in that same way. So the longer your credit history – your good credit history – the higher your credit score will be.
The next factor that influences your credit score is the timeliness of your payments. You need to pay each and every bill you have on time. If you don’t, if you pay some or most of your bills later, your credit score will suffer. This is especially true in this new day and age because many companies have very fast turnaround times on their payments received. That means they can report a late payment within minutes of the payment deadline. The grace periods of the past are disappearing. If you do nothing else with your credit, making your payments on time will have the most positive impact on your credit score.
A third, important factor in achieving an excellent credit score is your credit to debt ratio. This may seem a little odd but the more credit you have but don’t use, the better the credit bureaus like it. In other words they don’t want you to carry large balances with any credit card or line of credit. They would prefer that you have small balances in relation to the overall limit. To lenders, this means you’re managing your debt well and they tend to reward that with higher limits. So having a low debt ratio will boost your credit score too.
Achieving that excellent credit score takes time and focus. You need to build a long track record of paying your bill on time and never over-using your existing credit. This simply means that you need to build strong, effective habits when it comes to your credit cards and the way you spend. If you can do that, you’ll improve your credit score and have money-saving terms and rates at your disposal whenever you need them.