What Do People with High Credit Scores Have In Common?
What Do People with High Credit Scores Have In Common?There is no question that life can be a lot easier when you have high credit scores. After all, high credit scores can help you to land some pretty amazing perks like easier loan approvals, higher credit limits, lower interest rates, the ability to save a lot of money, and better negotiating power. If your credit scores are currently less-than-stellar one of the best methods to work on improving your situation is to mimic the characteristics of people who already have the great credit scores to which you aspire. You can find out what is working well for others and in turn copy that behavior. Keep reading below to discover 5 smart habits which people with high credit scores have in common.
Habit #1: Low Credit Card BalancesHigh credit score earners know that it is important to keep their credit card balances low or, better yet, paid off in full every month. When you revolve a balance on your credit card accounts from month to month not only are you wasting your hard earned money in interest fees, you are also potentially damaging your credit scores in the process. You may not realize it but outstanding credit card balances can damage your credit scores even if you never make a late payment on the account.
FICO and VantageScore, the 2 most widely used credit score brands currently on the market, have both designed their credit scoring software so that it pays close attention to your credit card balances. Specifically credit scoring models are concerned with your revolving utilization ratio or, put another way, how much of your credit card limits you have tapped into. The more your revolving utilization ratio increases the worse the impact will be upon your credit scores. Rebuilding Tip: If you are currently carrying high credit card balances the good news is that if you will start to chip away at those balances your credit scores should begin to recover little by little. Of course if you can afford to pay off your credit card balances right away with one big payment, that is ever better. Also Read: 5 Common Factors that Lead to a Bad Credit Rating
Habit #2: On-Time PaymentsAnother common characteristic which high credit score earners share is the fact that they keep their payments on time. It goes without saying that you can never earn really great credit scores if your credit reports display a long term history of habitual late payments.
FICO and VantageScore credit scoring systems both will factor in your payment history very heavily whenever your credit scores are calculated. If late payments or more severe delinquencies (collections, charge-offs, etc.) are present on your credit reports then your scores will suffer, sometimes to the extreme. Rebuilding Tip: A late payment cannot continue to hurt your credit scores forever. The Fair Credit Reporting Act (FCRA) places time limits which restrict how long late payments are allowed to remain on your credit reports. Most late payments must be removed from your reports after no more than 7 years from the date of the occurrence. Also, credit scoring systems are designed to pay less attention to late payments as they become older. This means that as late payments age their negative impact upon your credit scores will lessen. Also Read: How to Identify Credit Repair Scams
Habit #3: Limited New Applications for CreditMost high credit score earners make a habit of not applying for new credit accounts too frequently. When you apply for a new loan or a new credit card account a lender will access or “pull” your credit report(s) as part of the application process. A record of that credit pull will appear on your credit reports. This record of the access to your credit reports is known as an inquiry, specifically a “hard” inquiry if your credit was pulled by a lender. Hard inquiries have the potential to harm your credit scores for up to 12 months.
Rebuilding Tip: You do not have to be afraid to apply for credit when you really need it. However, you should probably eliminate the practice of frequently applying for new credit (especially credit cards) simply to chase rewards or discounts. Additionally, you never have to worry about hurting your credit scores when you want to check your credit reports yourself. This type of inquiry is “soft” and will never impact your credit scores in any way.