There are many paths to lower credit scores, but there is really only one to a truly elite high score. If you want to earn and maintain a credit score near or above 800, then you’re going to have to do the following…
Avoid negative credit entries. Anything that suggests severe financial mismanagement and terminal delinquency will keep you from obtaining the highest credit scores. So you must avoid negative entries—all of them: past-due balances, unpaid collections, bankruptcies, tax liens, judgments, repossessions, foreclosures, settlements. You may get away with very rare 30-day delinquencies separated by years of on-time payments, but anything more than that and you can say goodbye to a VantageScore 3.0 score of 800 or better. Ninety percent of “prime” consumers pay all of their obligations on time. You’ll want to be part of that 90 percent.
Avoid excessive credit card debt. The million-dollar question is, “What is excessive?” The answer is going to vary from person to person but, generally speaking, you’re going to want to ensure that the total of the balances on all your credit cards does not exceed 30 percent of the sum of all your credit card borrowing limits. And, just to be on the safe side, it’s not a bad idea to shoot for something considerably lower than 30 percent. Remember, that’s not the actual balance on your credit card as of today but rather the balance that appears on your credit reports, which is the balance from the prior month’s statement.
Avoid excessive debt. Prime consumers’ credit reports typically reflect between $100,000 and $105,000 in total debt. This amount can be difficult to adjust, especially if you’re financing a home, and total debt is only moderately influential on your score—but as you pay down large debts, your scores will improve.
An older credit report is better. This next one is largely out of your control, but as your credit reports continue to age, your scores will improve with more credit score points. All credit scoring models measure and reward the average age of your accounts as well as the age of the oldest account. It’s in your best interest to have older accounts. The only way to mess this up is to constantly open new accounts, thus preventing an increase in the average age. Prime consumers typically have about 13 loans on their credit reports, with the oldest typically being more than 15 years old.
Avoid too many inquiries and new accounts. The negative impact of applying for and opening new loans tends to be small and short-lived, as long as you continue making on-time payments. But earning elite credit scores requires you to do well across all scoring categories, not just the ones worth big points. Prime consumers open accounts sparingly, with their newest account being more than three years old.