• Mark Dallmann

How rare is an 800 credit score?

Lenders view hundreds of credit reports every year. The scores are all over the map, with relatively few over 800.

The primary reason more people don't have higher credit scores is that they have high credit card balances. Credit utilization, the balance on a credit card expressed as a percentage of the credit limit, is second only to the consumer's payment history in the calculation of the FICO score. Payment history makes up 35% of your score, but credit utilization is a close second at 30%.

When your balance exceeds 30% of the limit, your score starts to drop. A single credit card with 30% utilization will cost 15-20 points. The effect is cumulative for multiple accounts.

You should ideally pay your credit card balances in full each month. Otherwise, you are paying 18%-36% interest on those balances. Why would you want to do that?

The “sweet spot” for credit card balances is no more than 10% of the limit. If you habitually carry a high balance, you are wasting money and losing points on your credit score.

Consumers with high scores (775+) have these characteristics in common:

  • They have a flawless payment history for at least the past two years.

  • They have at least four active trade lines.

  • They have more than one type of credit—installment loans, mortgages, credit cards.

  • They have very low balances on their credit cards. Most habitually pay their balances in full each month.

  • They have had some of their accounts for a long time: four years or more.

If you are struggling to optimize your scores after a period of rough sledding, take heart. A history of late payments has less effect on your scores as it gets older. A single late payment has very little effect on your score after about two years. You can start today to raise your scores.

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