I’ve Had an 800+ Credit Score for the Last Decade. Here’s My Secret

As someone who writes about personal finance, you might think that I’ve always kept my finances in order. But like most young people, I was struggling with a poorly paid job and a heavy student loan burden. Shortly after we got married, my spouse lost his lucrative job and remained unemployed for over a year, during which time our credit card debt mounted.

Now, I’ve been lucky enough to maintain an 800+ credit score for the better part of a decade. No, I didn’t stumble upon a large inheritance or find a cushy six-figure job. Our journey to breaking free from a lackluster credit history started with a shaky financial foundation and was built up one slow, deliberate step at a time.

Why your credit score matters

For most adults, whether they like it or not, many of the financial options available to them are determined by their credit score. A low credit score can also put you in a cycle of financial failure, exposing you to higher interest rates and difficult loan terms.

People with “good” FICO credit scores of 670 or higher tend to have financial doors open more easily. You can secure better financing terms, interest rates and more competitive offers on everything from home and car loans to credit card balance transfers.

Note that you don’t need an 800+ or ​​exceptional credit score to secure a loan or a suitable interest rate. Most loan providers offer favorable terms and interest rates to people with credit scores of 670 or higher.

How to maintain a credit score of 800 or higher

You may be surprised, but Average FICO credit score At 718 people in the United States, the majority of Americans are rated as having “good” credit. If you want to get your FICO score into the “exceptional” category (and keep it that way), here are the steps I’ve taken to manage my credit over the past 10 years.

There’s no way around it — you need a budget

Avoiding forgetting payments starts with knowing where your money is going. Once you decide how much your expenses are, you can find a way to bank enough money to meet your financial obligations.

For me, it helps to remember that there are two ways to budget. It’s about saving more money or making more money. If your income is out of balance, it’s time to solve the problem from both sides by cutting back on expenses and considering a side hustle.

Carefully balance your credit usage

My credit score periodically experiences small fluctuations, mostly due to credit card usage and any new loans I may take out, and these changes are usually small and very temporary.

However, keep in mind that if your debt increases significantly along with canceling credit cards, your credit usage may change significantly. That’s why it’s a good idea to keep a few credit cards open and active, even if you don’t always use them on a regular basis.

make a debt repayment plan

Most people have some kind of debt, and large amounts of high-interest debt can snowball and put pressure on household finances. Sit down and evaluate what kind of debt you have, what debt currently has the highest interest rate, and what you can do to pay it off as quickly as possible.

In my family’s case, we did several balance transfers and debt consolidations at low interest rates while our credit gradually recovered. We then used all of our extra cash to slowly pay off our credit card debt over several years.

Never forget a payment

If someone were to ask you what the single key to a successful FICO score is, they’d probably tell you it’s your payment history. Although I’ve made a few other mistakes, my spouse and I have never missed a scheduled payment in the past 10 years.

How do I stay on top of my bills? I’m a point person who pays all my bills at the same time each month: utilities, mortgage, subscription services, and credit card bills. To make things easier, I usually set up electronic transfers, use automatic payment options, and set random due dates on my calendar.

Try not to be “house poor”

This is a difficult question in today’s housing market, but we have made it a priority to never be “house poor.” House poverty is a term that typically refers to the 30% rule, which states that your mortgage or rent payments should not exceed 30% of your gross monthly income.

In our case, this meant living in a “starter” home in a less-than-desirable neighborhood for much longer than we had planned. We also had to consider relocating until the housing market recovered and our capital stabilized.

If you live in an area where you can’t reduce your housing costs at this time, consider other areas where you can lower your expenses and save money.

Avoid multiple car loans

Again, this wasn’t always possible, but part of the recipe for financial stability wasn’t juggling two car loans at the same time. And yes, that means you could spend several years driving your reliable old clunker until the wheels fall off.

In our case, my spouse drove an 80’s Pontiac Bonneville with a beat-up seat as his daily commute for nearly a decade. After paying off my family’s SUV, I replaced my aging sedan with an electric car.

closely monitor your credit

Like most Americans, we’ve had our personal information compromised multiple times over the past few years. Having accounts with three credit bureaus and setting up alerts for early warning of suspicious activity can help prevent fraudulent purchases.

In one case, after falling victim to a job scam and compromising my Social Security number, I froze my credit and several accounts for several months so that I could closely monitor all activity. Experian explains that while a credit freeze may be a pain, it’s actually not. affect credit score.

Factors that determine your credit score

Do you have an obscure number in your name? No judgment. You may not even understand how you acquired a “bad” credit score. The following elements make up the formula that FICO uses to determine your credit score and indicate the easiest way to fix your credit score.

1. On-time payments

The largest percentage of your score (35%) is based on data about your payment history. Making your payments on time every month is one of the best ways to improve your credit score.

2. Your debt burden

How much you owe is also important. From mortgages to car loans to credit card balances, about 30% of your score is based on your total debt (also known as your credit utilization ratio) compared to your income.

3. Length of credit history

This is not the biggest factor (15%) in your credit score. There are also not many immediate actions you can take to increase the length of your credit history. It’s just a matter of time. Factors that contribute to your credit history include the average age of your accounts, the age of your oldest and newest accounts, and when you last used a particular account.

4. Credit mix

FICO evaluates how you handle different types of credit, so using a mix of accounts like credit cards, installment loans, and mortgages will improve your score, but it’s important to note that if you use a mix of accounts like credit cards, installment loans, and mortgages, you’ll improve your score Only if done within the deadline. At 10%, he will be the one whose credit mix contributes the least to his FICO score.

5. New credits

Applying for a new credit card may temporarily lower your score, but applying for a large number of lines of credit in a short period of time may indicate that you need additional credit to cover expenses you can’t pay. there is. Although it only counts towards his 10% of your FICO score, it can play a larger role for those with a less long credit history.

Maintaining a credit score of 800 or higher is achievable

An exceptional credit score may seem out of reach in the current economic climate, but it doesn’t have to be. You can slowly and steadily build your credit by organizing your budget, staying on top of your bills, and making smart financial decisions for yourself and your family.

The best part is that as your score starts to creep up, every step towards financial stability becomes a little bit easier. A good credit score opens doors and gives you the opportunity to make better choices and build a financial future free of debt.