It’s time we paid more attention to the flip-side of the credit game—what to do if you are winning!
LearnVesters probably don’t want to brag, but an awesome 32% of all consumers fall in the excellent credit range of a 720 credit score or higher. That means about one of every three of you are in the top-tier credit range, and can access the best financial options, the lowest rates, and strut their credit score to maximize savings opportunities. Congratulations!
However, a nasty little secret of the credit game is that the higher your score, the bigger your fall when you commit any mistakes. Credit scores' formulaic model makes it easier to build credit at low credit scores; conversely, the higher your credit score, the harder it is to gain more points and the easier it is—and the greater the damage—when negative credit actions hit your score. Let’s say one late payment knocks you from your excellent credit score to a 718, just under the 720 excellent range threshold. Though only a few points away from excellent, lenders will designate you in the good credit bracket and offer you higher rates, less options, and limited approval.
Though we congratulate you on achieving great credit, we need to warn you to be vigilant about keeping your score up. Pay attention to the biggest credit score traps to avoid, because we want you to continue to enjoy all the perks of excellent credit.
1. Don’t get greedy; watch the hard inquiries.
Excellent credit consumers often take the biggest hit from a string of hard inquiries. While one hard inquiry typically knocks 5 or so points from your credit score, applying for tons of credit and suffering multiple hard inquiries can add up substantial damage. Keep hard inquiries to an absolute minimum, 2-3 a year at most. With excellent credit, you can be selective. Shop around, choose the best loan or credit card, and apply only for that. One of the best perks of excellent credit is that you are very likely to be approved.
2. Don’t get lazy and start underusing or overusing credit.
Keeping up good credit is like keeping up your health with regular doctor visits, occasional exercise, and watching what you eat. Once you attain excellent credit, don't become idle. Maintain a healthy credit utilization rate, keep debt down, keep up on-time payments, and continue to use credit. One slip-up is to stop using credit altogether, which will cut your credit history short. Remember, you can't build credit without using credit. Another slip-up is to become sloppy with credit use and crashing your credit score by maxing out credit cards, building debt, and having high utilization rates.
3. Don't assume you're perfect; your credit report isn't.
Statistics claim 70% of consumer credit reports have a serious error, which can damage your score and compromise chances of getting a loan, credit card, or even mortgage. You may have perfect credit behavior, but there is a big chance you have a mistake on your credit score. It happens far too often, and can be as small as an erroneous late payment and big as a falsely-reported bankruptcy. It's your responsibility to check your credit report every few months to make sure your credit report is wiped clean of any possible inaccuracies, and be sure to dispute any credit report blunders.
Continue to keep track of your credit score for free with Credit Karma, and monitor any changes. Keep in mind that the best, and sometimes only, way to build and maintain your excellent credit score is time. It generally takes 10 years of positive credit history to break into the high 800 range. Years and years of consistent, positive credit history is the key to keep winning the credit score game.
Credit Karma™ is a completely free credit management service that provides free credit scores, financial education, and personalized savings recommendations. We help more than 2 million consumers realize the everyday cost savings of having a good credit score.