An 800+ credit score. We would all want to be that one guy in our social circle who is known for being in this elite club. But apart from bragging rights (which, let’s face it, is quite cool), an 800+ score has tangible financial and non-financial benefits.
Good thing? It is always within reach. If your score is well below 800 (see the Best Way to Check Credit Score), you too can join the ranks of America’s 800+ club.
What People with an 800 Credit Score Look Like
In a nutshell, here are the characteristics of a person with an 800 credit score:
- They have a perfect payment history for the past 24 months
- On average, they use 7% of their available credit
- Their average age account age is old
- They tend to carry multiple credit cards
22 percent of American adults have FICO scores of 800 or above according to the Ascent credit study. That is more than a fifth of the country’s adult population.
Implication? An 800+ credit score is far from the rarity many would imagine it to be. Clearly, many have done it before you. All you need is to apply the financial habits they used to get there. And that’s exactly what I’m going to show you here.
5 Tips to Help You to Get Your Credit Score to 800
While a fifth of America’s adult population is a large number of people, this statistic also means nearly 80 percent of adults have a sub-800 score. To get into the 800+ club, you need to do things somewhat differently from the 80 percent.
Virtually anyone irrespective of age (see How to build credit at 18) and income strata can maintain an 800+ score. Here’s how.
Also Read: Credit Score Statistics
Payment History: Never Miss a Payment
Payment history is the single most important factor in your credit score. It accounts for more than a third of the FICO score’s calculation (see FICO vs Vantage). 800+ credit score holders typically have a perfect payment history for at least the past 24 months.
Do not take any payment or bill lightly. From medical co-pays to magazine subscriptions, all of them matter. If a tiny bill remains unpaid too long, the debt will be sent to a collection agency, and that is something the creditor will report to credit bureaus.
I must mention though that the payment of certain credit cards adds more value to your credit than others as this video explains. In a nutshell, a Visa/MasterCard credit card contributes the most to your credit score while a store card (like a Target or Home Depot credit card) contributes the least.
According to Merrill Chandler, the credit optimization guru in that video, there are different tiers of credit cards. Some credit cards provide more scoring value than others. This is how he breaks it down:
A “Visa” or “Mastercard” isn’t any card that has those logos on them. In this case, they refer only to credit cards issued directly by the big banks. The four big bank credit cards are those offered by Chase, Wells Fargo, Citi, and Bank of America.
When you make a payment on a visa or mastercard, you get the maximum credit scoring benefit from that. A payment from a Discover card gives you 20% less value, and store cards give even less.
If you have difficulty remembering when your debt is due each month, use autopay. In case you are not sure how much you will need in order to pay the bill in full, set it to pay the minimum.
Automatic bill payment is available for utility bills as well. Most utilities will allow you to configure autopay that automatically withdraws the amount due from your savings account, checking account, or credit card.
In case you do not want to use autopay, set up payment reminders. You could do it on your own using free tools such as Google Calendar or schedule online or email reminders within your online credit card company or bank account.
The sooner you commence paying your debt on time, the quicker your credit score will improve. Also, older credit penalties will matter less over time. Begin now and stay consistent. You do not have to be completely debt-free to have a high credit score. Nevertheless, commit to paying all your bills on time.
Amounts Owed
Amounts owed (or credit utilization) account for about 30 percent of your FICO score. The credit utilization ratio is how much credit you have used as a proportion of the total credit limit available to you.
For example, if you have a credit limit of $5,000 and have an outstanding balance of $1,000, your utilization ratio is 20 percent.
Do not max out your credit limit. The more extended you are, the harder it will be to push down your utilization ratio to healthy levels.
The CFPB recommends a credit utilization rate of below 30 percent. Still, while that may be sufficient for a good score (see Is 670 a Good Credit Score), you need to do more if you are aiming for the 800+ range. On average, 800+ credit score holders use about 7 percent of their available credit according to MyFICO.
Low utilization ratio points to strong personal financial management skills include leaving large headroom to cater to financial emergencies. High utilization ratio implies you will be at high risk of defaulting on your obligations if an unexpected financial setback comes along.
If you find that you have to use your credit card when your refrigerator, car, or other item breaks down, and then struggle to pay off your credit card bill in full each month, start an emergency fund.
The good news? Your credit utilization ratio is one thing you can change the fastest as long as your finances allow you to do so. Practice financial discipline by keeping your spending flat even as your income grows. If you carry credit balances from month to month, pay that off as soon as you can.
Time your monthly payment right. Credit card issuers will usually report credit information to a credit bureau toward the end of your billing cycle. Now, what if you pay for a $4,000 bathroom renovation on your $5,000 card limit just before they report your utilization?
You will be shown as having an 80 percent utilization ratio even though you always pay off the entire credit card balance each month. Plan your debt payments with the credit reporting date and not the payment due date.
If paying off the entire balance at one go proves strenuous, consider making smaller payments twice or thrice a month.
In case your credit utilization ratio is consistently above 30 percent but you have no problem paying your balances in full and on time, perhaps you should apply for a credit limit increase. This will push down your utilization ratio.
Length of Credit History
One of the golden rules of investing is that the past performance of a given asset is that there is no guarantee of similar returns in the future. But credit scoring models adopt a different view. They hold that past credit behavior to a pretty reliable barometer of future action.
If you opened your first credit account a year ago and have paid all your bills on time, that is impressive and certainly good for your credit score. However, credit scoring models do not treat a one-year account the same way they do a 10-year account even when both have a perfect payment record.
If you think about it, this is rational. The longer you have had a credit account, the more financial storms it has likely been subjected to. Someone who has successfully stayed on top of their payments for 10 years has certainly demonstrated a firm resolve to remain in tight control of their financial health.
Credit history accounts for 15 percent of your FICO score. A lengthy excellent record of paying off your credit cards and bills in a timely fashion is good. For an 800+ score, you have to build a long reputation of consistently paying bills promptly.
Ergo, if you have had a stellar credit record over the past 20 years, it strongly suggests a deep-seated, positive routine in place for managing your money. As this routine is now a well-established personal lifestyle, you are unlikely to deviate from it.
The older your accounts and the longer your credit history, the better. According to FICO.com, the average age of the oldest account for people with an 850 FICO score (perfect score) is 30 years old.
Fortunately, you don’t have to wait to have credit accounts that old to have an 800+ credit score. Aim to accumulate multiple credit accounts that have been open for at least 10 years.
Subsequently, closing old accounts will impair your credit score. A good rule of thumb for building credit until you have an exceptional credit history is to get three quality credit cards and keep them forever.
The more credit cards you have, the greater the risk that you may abandon and close your older accounts. Having fewer cards compels you to transact using the ones you have.
Credit Mix
Credit accounts fall into two categories–installment accounts and revolving accounts.
Installment credit has an end date and requires you to make a fixed payment each month until you finally pay it off. The most common examples of installment debt are a mortgage, auto loan, student loan, and personal loan.
Revolving credit accounts do not have an end date. You use them as often as you like but need to pay off a certain minimum regularly. Credit cards are the best example of revolving credit.
You need a nice mix of credit accounts. Credit mix accounts for 10 percent of FICO credit score calculation. Ideally, you should have at least one installment loan and one revolving credit account.
A good credit mix will ideally include several credit cards, a mortgage, and one other type of installment loan (see How to build credit without a credit card).
Your credit mix demonstrates your ability to manage different types of credit. People with FICO Scores of 850 had on average 6.4 credit cards compared with the national average of 3.8 credit cards according to Experian.
That being said, do not take on debt you do not need in an attempt to diversify your credit. This will be self-defeating if you eventually have difficulty paying them off.
You can, however, be strategic. For example, if you have credit card debt, consider taking an installment loan to pay off part, or all of it. This will not only diversify your credit mix but also eliminate the higher interest rate you would have continued paying for the credit card debt.
New Credit
The biggest shopping seasons of the year are characterized by department stores falling over themselves as they offer a sizable discount when you sign up for their credit card.
It is a clever marketing technique that appeals to that inner need to keep up with the Joneses’ or finally get a means of buying those items you have always wanted.
Applying for a new card whenever an offer is made to you can, however, be a major impediment to achieving an 800+ score. The hard credit inquiries that come with applying for a new credit card will hurt your score.
Any other lenders you approach from that point who run a credit check will assume there has recently been a negative event. Perhaps a job loss or large medical bill compels you to seek out multiple credit accounts to stay afloat.
New credit card accounts are responsible for 10 percent of your FICO score. Try not to open more than one new account per year. Rather, keep your accounts for years. Avoid too many new credit inquiries. Keep hard inquiries at just 2 per year.
When you do need a card but are not certain you qualify, submit a pre-qualification application. These result in soft inquiries and do not have any impact on your credit score.
Perks of Having an 800 Credit Score
An 800+ credit score offers you a raft of benefits.
Higher chances of approval: Your credit score is a mark of your creditworthiness. Lenders do not know you much in person. They rely on the objective data of a credit score to know whether you are likely to pay back a debt or not.
An 800+ score suggests you are a low-risk borrower and this raises your odds of credit account approval.
Preferential interest rates: An excellent credit score gives you access to better credit terms and interest rates from lenders. You will see this impact most conspicuously when applying for large loans such as mortgages and car loans.
The interest rate savings can add up to hundreds of thousands of dollars over your lifetime.
Better credit card offers: An 800+ credit score will give you access to credit cards that have a 0 percent promotional rate on purchases as well as balance transfers. You can also get rewards cards with lower interest rates and lower, or 0, fees.
Lower insurance premiums: Auto insurers will reward you for an exceptional credit score. Both your insurance history and your credit record will contribute to the computation of your insurance risk score. An 800+ credit score will see you pay lower premiums.
Background checks: A credit score may be a metric on personal finance, but its benefits spill over to realms beyond finance. A perfect credit score increases your attractiveness to potential employers and landlords.
Get a cell phone on contract: A high credit score will qualify you for a cell phone on contract. You will not have to pay a security deposit and may be eligible for discounted prices on the latest phones.
An excellent credit score allows you to avoid the pricey pay-as-you-go-plans those with low scores have to settle for.
Avoid utility security deposits: Deposits may be as high as $200 and can be a pain when relocating. With an 800+ score, you avoid paying the deposit.
How Long Does It Take to Get an 800 Credit Score?
How long it takes you to join the 800+ club will depend on where your credit score is at now . The further off the mark you currently are, the longer it will take. As a general principle though, you will need to demonstrate excellent credit habits for several years.
The effort is well worth it even if it takes you 10 years or more to get to 800+. Many lenders consider 760 the cutoff for a great credit score. Once you surpass that 760 threshold, you’ll already enjoy most of the same benefits as someone with an 800+ score (see Why is Credit Important).
This article originally appeared on DigitalHoney.money and was syndicated by MediaFeed.org.
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Does refinancing hurt your credit score?
Most people want to refinance their student loan to help their financial situation. So, the possibility of hurting your credit by going through the process of refinancing is alarming.
Fortunately, any harm done to your credit in applying should be pretty minor–and temporary. It’s just a part of going through obtaining a loan.
As for whether student loan refinancing will inflict any other kinds of damage to your credit, it definitely shouldn’t. To make sure your credit score is safe, learn more about how refinancing works and how you can best protect yourself.
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A credit score is the number assigned to you by any of the credit rating agencies. Those agencies include Experian, TransUnion, and Equifax.
Whenever someone looks at your score–a lender considering whether to give you a loan, a landlord deciding if you’d make a good tenant–they’ll see a number that tells them how good a risk you are. Credit scores are like a snapshot of your financial health.
If you have a good credit score, you’re going to get more green lights to what you want: a loan with low interest, an affordable car insurance policy, a high-limit credit card. On the flip side, if your score isn’t good, you’re going to be turned down for loans, lose out on homes and cars, and only be able to get high–interest credit cards.
Judgements vary, but anything 700 or above is considered a strong score. Your credit score is influenced by:
- On-time payments for bills
- Steady (but not excessive) use of credit
- History of paying balances in full
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It’s all about choices in paying off student loans. With student loan refinancing, you take your existing loan, one you’ve been paying down, and approach a private lender to ask for a new student loan. The goal is to get a better deal: lock into savings-producing lower interest rates, sign up with more favorable terms. The lender–a bank or other financial institution–basically buys the old loan and issues a new one with you.
Student loan debt has reached staggering amounts in the U.S.
Generally, people refinance a federal student loan issued while they were in college and take out a private loan with lower interest. It should be noted that with student loan refinancing, if you do so, you lose the protections of federal loan forgiveness and cancellation programs.
Damir Khabirov / istockphoto
So, to dig deeper into the question “Does refinancing student loans hurt your credit?” we’ll scrutinize the loan application process. The bank, credit union, or online lender you’ve gone to will perform what is known as a “hard credit check” when you apply for a loan. The intent is to see your number and the history behind the number.
Why does a hard credit check affect your number? After all, you didn’t do anything “wrong.” One explanation is that a hard inquiry means a lender is assessing your credit report and that creates uncertainty. You may be trying to get a personal loan, a student loan, or a mortgage. Something could be about to happen that could shake up your financial “health.”
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Sometimes this hard check doesn’t do anything to your credit. But other times the check will lower your credit score. How much? Occasionally as much as 10 points. More often 5 points or less. And fairly soon your score will return to where it was before the hard check.
The problem is if you submit multiple full applications for loans over the course of several months, your credit score could take a bigger hit. The reason is this suggests more volatility. So, if you put through these full applications over a long stretch of time, then the question of “Does refinancing student loans hurt credit?” carries the answer “Yes.”
There are proactive steps you can take to make sure your credit score makes it through the process in good shape.
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You can pre-qualify for a loan offer, and it won’t affect your score. Take advantage of that when you decide who you want to put in an application with. A full application is the only type that will nudge down your credit score. So try to submit to the lenders you consider your best options.
Also, and this is key, try to apply with your chosen few lenders for a student loan within the same month. That keeps the damage to your credit score to a minimum.
Note: Your FICO score won’t be significantly hurt by multiple inquiries if they occur within a 30-day window. Your Vantage credit score may have a shorter window of 14 days.
Anhelina Pikas / iStock
When you’re trying to refinance, your money moves are under a spotlight. You need to be meticulous about continuing to make payments on your loan throughout the process. If you are late with a payment now, your credit score might suffer just when you want it to be perfect.
Keep on top of the payments for your original student loan until you are totally sure that the refinancing process is complete.
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When you analyze the question of whether refinancing student loans hurts your credit, you need to acknowledge the importance of making payments on time.
Yes, the application process could be finished, but any late payments will be reported to the credit agencies and lower your score. When choosing the terms of the loan–which is how long you will need to pay it off–make sure the repayment isn’t going to be too hard for you to cover. When refinancing, some people choose a shorter loan term and higher payments to get their loan over with. But the most important thing is making payments on time. Then refinancing is unlikely to hurt your credit.
Be sure to weigh this priority when you study the pros and cons of refinancing student loans.
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How will refinancing affect credit score? When you refinance your student loan, the private lender will do a hard check of your credit, which could cause a dip in your rating for a short time. If you apply to as few lenders as possible and keep it within a short time frame, that will minimize the chance of any credit damage. And be diligent in timely loan payments.
Learn More:
This article originally appeared on LanternCredit.com and was syndicated by MediaFeed.org.
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit (https://www.consumer.ftc.gov/topics/credit-and-loans)
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Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Personal Loan:
SoFi Lending Corp. (“SoFi”) operates this Personal Loan product in cooperation with Even Financial Corp. (“Even”). If you submit a loan inquiry, SoFi will deliver your information to Even, and Even will deliver to its network of lenders/partners to review to determine if you are eligible for pre-qualified or pre-approved offers. The lenders/partners receiving your information will also obtain your credit information from a credit reporting agency. If you meet one or more lender’s and/or partner’s conditions for eligibility, pre-qualified and pre-approved offers from one or more lenders/partners will be presented to you here on the Lantern website. More information about Even, the process, and its lenders/partners is described on the loan inquiry form you will reach by visiting our Personal Loans page as well as our Student Loan Refinance page. Click to learn more about Even’s Licenses and Disclosures, Terms of Service, and Privacy Policy.
Personal loan offers provided to customers on Lantern do not exceed 35.99% APR. An example of total amount paid on a personal loan of $10,000 for a term of 36 months at a rate of 10% would be equivalent to $11,616.12 over the 36 month life of the loan.
Student Loan Refinance:
SoFi Lending Corp. (“SoFi”) operates this Student Loan Refinance product in cooperation with Even Financial Corp. (“Even”). If you submit a loan inquiry, SoFi will deliver your information to Even, and Even will deliver to its network of lenders/partners to review to determine if you are eligible for pre-qualified or pre-approved offers. The lender’s receiving your information will also obtain your credit information from a credit reporting agency. If you meet one or more lender’s and/or partner’s conditions for eligibility, pre-qualified and pre-approved offers from one or more lenders/partners will be presented to you here on the Lantern website. More information about Even, the process, and its lenders/partners is described on the loan inquiry form you will reach by visiting our Personal Loans page as well as our Student Loan Refinance page. Click to learn more about Even’s Licenses and Disclosures, Terms of Service, and Privacy Policy.
Student loan refinance loans offered through Lantern are private loans and do not have the debt forgiveness or repayment options that the federal loan program offers, or that may become available, including Income Based Repayment or Income Contingent Repayment or Pay as you Earn (PAYE).
Notice: Recent legislative changes have suspended all federal student loan payments and waived interest charges on federally held loans until 05/01/22. Please carefully consider these changes before refinancing federally held loans, as in doing so you will no longer qualify for these changes or other future benefits applicable to federally held loans.
Auto Loan Refinance:
Automobile refinancing loan information presented on this Lantern website is from Caribou. Auto loan refinance information presented on this Lantern site is indicative and subject to you fulfilling the lender’s requirements, including: you must meet the lender’s credit standards, the loan amount must be at least $10,000, and the vehicle is no more than 10 years old with odometer reading of no more than 125,000 miles. Loan rates and terms as presented on this Lantern site are subject to change when you reach the lender and may depend on your creditworthiness. Additional terms and conditions may apply and all terms may vary by your state of residence.
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Terms, conditions, state restrictions, and minimum loan amounts apply. Before you apply for a secured loan, we encourage you to carefully consider whether this loan type is the right choice for you. If you can’t make your payments on a secured personal loan, you could end up losing the assets you provided for collateral. Not all applicants will qualify for larger loan amounts or most favorable loan terms. Loan approval and actual loan terms depend on the ability to meet underwriting requirements (including, but not limited to, a responsible credit history, sufficient income after monthly expenses, and availability of collateral) that will vary by lender.
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Information about insurance is provided on Lantern by SoFi Life Insurance Agency, LLC. Click here to view our licenses.
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Featured Image Credit: Chinnapong / istockphoto.
