Folks with exceptional credit scores also share similar financial habits when it comes to their debt obligations.
That’s the conclusion from a recent LendingTree study that analyzed 100,000 credit reports of Americans with credit scores at or above 800. A FICO score of 850 is considered a perfect credit score.
For those looking to get better interest rates and terms on loans, the report’s findings offer a roadmap on how to improve your credit score. Here’s how.
They make on-time payments — all the time
Every single one of the consumers with a 800 score or above paid their bills on time each month, according to LendingTree’s findings. That’s key because payment history makes up 35% of your credit score. Missing just one payment can ding your credit score, according to Experian data. A late payment can also stay on your credit report for up to seven years.
“The most important thing in credit is to pay your bills on time, every single time. Nothing else matters more than that,” Matt Schulz, chief credit analyst at LendingTree, told Yahoo Finance.
“That was really the biggest takeaway, paying your bills on time is non negotiable if you want an 800 credit score.”
They carry debt
Some people may think that folks with the best credit scores have no debt. But the opposite is true. To get a good credit score, you must demonstrate that you’re responsible with managing debt payments. That requires having debt.
On average, those with near-perfect credit scores carried on average $150,270 in debt, including mortgages. That translated to average monthly payments of $1,556 — which as previously noted, were paid on time every month.
“If you successfully handle multiple types of loans or debts, over many years, your credit score is going to improve,” Schulz said. “There is no doubt about it.”
They’ve been managing debt for a long time
The oldest active account for consumers with high credit scores was 22 years on average, according to the study. The length of your credit history is the third most-important factor in calculating a credit score, making up 15% of your score.
Of course, age plays a factor. For instance, the average oldest active account for the silent generation was 28.2 years. Baby boomers followed at 24.8 years.
But age isn’t the only factor. For instance, the average oldest active account for millennials was
less than 15 years, while the average was 18 years for the youngest generation – Gen Z.
That could be because parents and guardians were more likely to have included them as authorized users on their cards while they were minors in order to start building their credit, the survey noted. A growing share of lending institutions allow card holders to add a child who is 13 years or older to a credit account as an authorized user, according to LendingTree.
“It’s a really powerful positive tool, but there could be some risk to it,” Schulz said. “If your kid goes crazy spending on that card, the parents or guardians are the ones responsible for making those payments. So you need to have some open and honest conversations about expectations and consequences.”
They have multiple credit accounts
The average consumer with a credit score at or above 800 had 8.3 open accounts in 2022. Those who had a good mix of credit and paid on-time were also likely to have higher credit scores.
Credit mix — such as personal loans, credit cards, and mortgages — accounts for 10% of your credit score. For those aiming to get into the 800s, it can be worth paying attention to, Schulz noted, though it's not the most important aspect of credit scoring.
“When you mix up your credit lines, that can be helpful for your credit score. However, it’s not something you should enter into lightly,” Schulz said. “You shouldn’t get a loan you don’t need just because you want to improve your credit mix. But if you’re looking for a loan for something like debt consolidation or a remodel and can use that loan instead of charging your credit card, it may be useful.”
They aren’t jumping at credit offers
Consumers with an 800-plus credit score were more careful about opening new credit accounts. The average number of credit inquiries — when a lender pulls a credit report to process an application — for new credit cards was just 1.8 within the past two years.
New credit accounts can make up 10% of your credit score, according to Schulz, and remain on your credit report for two years. Generally, your credit score will take a hit when you apply for new credit, but the impact wanes after six months.
“The results show that people are generally being cautious about applying for credit,” Schulz said. “The average person who just wants to build their credit score opens new credit accounts as they need it — not necessarily for other reasons.”
Gabriella is a personal finance reporter at Yahoo Finance. Follow her on Twitter @__gabriellacruz.