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Tuesday, November 6, 2012

Secrets of High Credit Scorers

Have you ever wondered: Just what do I have to do to have a superhigh credit score?

MyFico.com, the consumer arm of FICO, creator of one of the most widely used family of credit scores, has published a report on those it considers “high achievers,” or those with FICO scores of 785 or higher.

FICO scores range from 300 to 850 - the higher the score, the better your credit profile, and the more likely you are to get a loan at a favorable interest rate. Scores are based on information reported by lenders to credit reporting bureaus like Experian, TransUnion and Equifax. You can have multiple scores, depending on what sort of loan you're seeking and which credit bureau is doing the reporting.

More than 50 million people - about a quarter of all people with credit scores - have scores of 785 or higher, and they exhibit “strikingly similar” credit habits, regardless of background and life experience, according to myFico. (The analysis is based on April data and used FICO 8 scores, the most recent version of the “general purpose” FICO score.) Over all, those with the highest scores keep low revolving balances relative to their available credit; they don't “max out” their credit cards; and they consistently make payments on time, even if it's just the minimum required amount.

High credit achievers aren't debt-free. One-third have total balances of more than $8,500 on nonmortgage accounts. The rest have total balances of less than $8,500.

But while they may carry a balance, 96 percent of high achievers show no missed payments on their credit report. And those who do have late payments had one four years ago, on average. Less than 1 percent of high achievers have an account past due.

This is important, because payment history represents 35 percent of an individual's FICO score. So making at least the minimum payment in every billing cycle helps support a high score.

Even those with excellent FICO scores may have had bumps along the way. About one in 100 high achievers has a collection on a credit report, and about one in 9,000 has had a tax lien or bankruptcy.

But high achievers often keep balances low and use an average of only 7 percent of their available revolving credit.

The FICO high achievers have a well-established credit history and seldom open new accounts. Over all, their average credit account is 11 years old.

“While people with a high FICO score are not perfect, their consistently responsible financial behavior usually pays off over time,” Anthony Sprauve, credit score adviser for myFico, said in a statement.

How does your credit behavior compare with those of the “high achievers?”