Uh oh…remember when a 760 FICO score was deemed sufficient to secure the best rates and terms on credit cards, auto loans, mortgages, and so on?
Well, new research from credit score provider FICO might up the ante on that ideal score to shoot for.
The company today revealed a new bracket of credit score winners, those with FICO scores greater than 785.
For the record, FICO scores range from 300 to 850, with higher scores representing lower risk of default.
FICO even has a name for these elite consumers, “High Achievers.”
What Makes One a FICO High Achiever?
Well, for starters, it’s not really an exclusive club, not even close.
More than 50 million consumers have FICO scores in this range, which represents about 25% of all individuals with credit scores (scorable population).
Additionally, high achievers aren’t debt-free, as you might have guessed. One-third have total non-mortgage balances that exceed $8,500.
In fact, the average high achiever has four credit cards or loans WITH a balance. This can include a mortgage, an auto loan, etc.
These high achievers also have, on average, seven credit cards, including both open and closed accounts. To me, that sounds like a lot.
But where they do well is in the percentage of credit used, known as credit utilization. On average, they only use 7% of their total available credit.
So if their aggregate credit limit is $100,000, they’re only using $7,000 of it.
Keeping balances low is a great way to maintain an excellent credit score. High balances may indicate that you’re overextended.
These consumers also have great track records of making on-time payments, which is the most important piece of the FICO pie. Just 4% have a missed payment on their credit reports.
And only 1% of high achievers have a past-due account.
Time Is Huge!
Another item that stood out was time.
The oldest tradeline for a high achiever was opened an average of 25 years ago. This explains why there was/is a black market for buying and selling tradelines.
I’ve always said time was a huge component of a good credit score because you can’t really prove yourself without it. Heck, anyone can behave for a few years.
Additionally, the average credit account is 11 years old, so it’s not just one or two old accounts, it’s most of them.
Finally, the most recent credit account has an average age of 28 months, meaning these winners have established their credit and haven’t messed with it anytime recently.
High Achievers Make Mistakes Too
I alluded to high achievers being less than perfect, and it’s backed up by the following stats:
– 1 in 9,000 have experience bankruptcy or tax liens
– 1 in 100 have a collection account on their credit report
Ok, so these numbers don’t look all that bad, but the point is, even if you happen to make some financial missteps, it’s possible to get back on your feet.
Remember, time is a huge component. In other words, it’s not a sprint, it’s a marathon.
Oh, and FICO noted that many consumers have reached “high achiever” status without the use of credit cards.
However, they were quick to note that using a credit card for an occasional purchase could actually be better than not using credit cards at all because it indicates responsible credit management.
So there you go. Do you have what it takes to a be a high achiever? Have you followed in the footsteps of these winning consumers?
If not, you might want to take some cues from FICO to improve your credit score and get on the right track.