People with excellent credit work hard to achieve their credit score. FICO ratings range from 300 to 850. However, a score 750 or higher makes you a good candidate for loans and credit cards. Good credit doesn't happen overnight. It takes years to develop a stellar score. For that matter, there are things that people with excellent credit don't do. Here are seven ways to keep a good score.
1. Don’t Rely on a Credit Card
A credit card is an excellent way to establish a credit history and rebuild a credit score. However, people with excellent credit know that it's important to diversify and have different types of accounts. This small maneuver only makes up about 10% of credit scores. However, a blend of different debts proves that you can manage multiple accounts. This looks good from a credit scoring standpoint. Therefore, it’s smart to have a credit card and one or two installment accounts.
2. They Don't Pay Credit Cards Late
High credit card debt is the kiss of death when trying to establish a high score. Therefore, people with good credit pay off cards each month — but they don't wait until the due date. They might pay before the creditor’s reporting date. Therefore, if they charge thousands of dollars to a credit card, and they pay off this credit card before the company reports to the bureaus each month, it’ll appear as if they have a zero balance.
3. They Don't Stop Using Their Cards
Some people pay off credit cards and never use these cards again. However, it's good to keep credit card accounts active. Even if you only charge $10 a few times a year, these small purchases keep the account active. Some credit card companies cancel inactive accounts or stop reporting these accounts to the bureaus.
4. They Don't Turn down Credit Limit Increases
When a credit card company increases your credit limit, you have the option of turning down the increase. However, a higher credit limit doesn’t hurt your score — it can actually help it, especially if you carry a balance on your cards. A credit limit increase can improve your credit utilization ratio, which is the percent of available credit that you use. The more available credit you have, the better your credit score.
5. They Don't Get Too Many Retail Charge Accounts
It's tempting to open a retail account on the spot to save 10% off a purchase. However, people with good credit know the danger of credit inquiries. Each inquiry can reduce scores by as much as five points, sometimes more.
6. They Don't Ignore Credit Monitoring
If you have bad credit, you might downplay the importance of checking your own credit report. However, one fraudulent activity can completely destroy your credit score. People with good credit never underestimate the power of identity theft. They check their credit reports at least once a year, and they take advantage of fraud monitoring services.
7. They Don't Lend out Their Credit Cards
People with good credit always keep a close eye on their credit cards. They don’t lend their cards to relatives or friends, and if their cards turn up missing, they immediately report the lost or stolen card to their credit card company. Giving others access to their credit card is dangerous because these people might ring up a ton of debt, or lose the card.
Good credit is something to be proud of, and if you’re working towards good credit, it's important that you know how to maintain a high score. This can result in faster loan approvals and better rates. What are other things that people with good credit never do?