What Is Excellent Credit?
There are two different scoring models that help to determine how creditworthy you are, FICO and VantageScore. Let’s see what these scoring models are and what counts as excellent credit according to them.
Few people can reach and maintain a perfect credit score of 850, but over 21% of Americans do fall within the “Excellent” category.
What that “Excellent” category is will depend on the scoring model that’s used and the credit bureau that’s pulling your score – Equifax, Experian, or TransUnion.
There are two popular scoring models used in the USA, FICO, and VantageScore. They both serve the same purpose – determining how creditworthy you are. Or, in other words, determining how likely you are to accumulate debts and be late on payments.
Both FICO and VantageScore have the same credit score range, which goes from 300 to 850. However, there are a few differences in ranges for specific credit categories.
FICO credit score range is as follows:
- Very poor: 300-579
- Poor: 580-669
- Fair: 670-739
- Good: 740-799
- Excellent: 800-850
VantageScore credit range is as follows:
- Very poor: 300-499
- Poor: 500-600
- Fair: 601-660
- Good: 661-780
- Excellent: 781-850
Not all lenders look into the same credit scoring model, so it’s a good idea to maintain both high FICO score and high Vantage score.
Factors That Impact Your Credit Score
If you want to improve or maintain your credit score, you need to know how to do it. The factors that impact your credit score will tell you all you need to know about this.
You’ll often hear advice such as “pay your credit card debts on time”, “never miss a payment.” But why? Besides needing to pay extra interest or a late fee, is it really such a bad thing being late on a few credit card payments?
As a matter of fact, it is. Being late on your payments won’t just cost you a little bit more money down the line, it will lower your credit score, impact your approval for other types of credit and loans, and make your credit cards more costly.
Your credit score is a complex equation that takes into account many different factors. And, of course, those factors depend on the credit scoring model used.
Factors that impact your FICO score are as follows:
- Payment history accounts for 35% of the score
- Length of credit history accounts for 15% of the score
- Credit utilization rate accounts for 30% of the score
- New credit accounts for 10% of the score
- Credit mix accounts for 10% of the score
Factors that impact your Vantage score are as follows:
- Payment history accounts for 40% of the score
- Length of credit history and credit mix accounts for 21% of the score
- Credit utilization rate accounts for 20% of the score
- Debt accounts for 11% of the score
- Hard inquiries and recent credit behavior account for 5% of the score
- Available credit accounts for 3% of the score
Of course, your age, sex, marital status, race, religion, nationality, salary, and others have no impact on your credit score whatsoever.
Types of Credit Cards for Excellent Credit
There are many different credit cards that are used for different purposes. With an excellent credit score, you can essentially apply for any card that you want.
With excellent credit, the world is your oyster. You can easily apply for almost any type of card you’d like, and you’ll have very high chances of being approved for it.
This doesn’t mean that you can be negligent, however. You still need to pay very close attention to the terms and conditions of your credit card, and you still need to compare and contrast different issuers to get the best offer.
If you’re looking for your next credit card for excellent credit, these are the ones that would suit you best:
No annual fee credit card
Annual fees can make credit cards exceptionally costly. As a cardholder with an excellent credit score, you can easily find a no annual fee credit card and have some common fees and charges waived. Some issuers will offer cards with no annual fees only for the first year of being a cardholder, while others will have no annual fees whatsoever for the duration of your credit card.
Low-interest credit card
Interest is charged on the amount of balance you carry from month to month. If you’re to maintain an excellent credit score, you’ll need to make sure that you always pay off your credit card debts on time and in full. But since you never know what life may bring, it can be very handy having a low-interest credit card in case you miss a payment.
No foreign transaction fee credit card
If you’re a frequent traveler, you’ll greatly benefit from having a no foreign transaction fee credit card. You’ll need a good credit score or higher to get approved for these cards, and they can come in quite useful when you’re across the pond.
Rewards credit cards
As a cardholder with excellent credit, you’ll find it easy to qualify and get approved for some of the best rewards credit cards offered by issuers. When using such credit cards, you can receive great cashback rewards, travel rewards, shopping rewards, and more just by making everyday purchases.
What Are the Benefits of Having an Excellent Credit Score
What do you get from striving for an excellent credit score? Is it worth the dedication and hard work you need to put into it? Let’s see.
An excellent credit score shows to lenders and credit card issuers that you are responsible with your money, and this is of utmost importance. Since credit cards are essentially loans from banks and issuers, they need some sort of a guarantee that you’ll pay them their money back.
The best guarantee is your credit score. It shows your past credit behavior and serves as an indicator of how trustworthy, or better said creditworthy, you are. And the more creditworthy you are, the bigger the financial benefits will be.
Lenders and credit card issuers charge higher interest rates to those with lower credit scores to discourage them from being late on payments. Since you’re a much less risky candidate for a loan, and you’re much more likely to pay your debts on time when you have an excellent credit score, there’s no real reason why you’d need high interest rates.
Whether we’re talking about credit cards, car loans, home loans, or anything in between, you’ll find it much easier to get very low interest rates when you apply for a new line of credit.
Easier Loan Approval
An excellent credit score won’t guarantee that you’ll be approved for a loan, but it can be of great help. As previously mentioned, your previous credit history indicates how responsible you are with your finances, and your excellent score proves just how creditworthy you are.
Easier Apartment Approval
More and more landlords these days look into their potential tenant’s credit score before they offer them a lease agreement. If you have a high credit score, you’ll find a place to rent without a hitch.
Better Insurance Rates
Insurance companies almost always take into account your credit score, among other things, when they’re developing your plan. You’ll get lower insurance premiums and overall better terms and conditions for your insurance with an excellent credit score.
Higher Credit Card Limit
Your salary and your credit score are the determining factors for your credit card limit. With an excellent credit score, banks and issuers will allow you to borrow more money from them because your risk factor is lower, and you’ve already proven that you can responsibly pay back your debts. A higher credit card limit can come in quite handy when you’re making larger purchases.
The Bottom Line
It takes a lot of hard work to get to an excellent credit score and a lot of hard work to stay there. But the benefits you receive from it are worth the dedication.
Just remember, credit scores are fluid, and it’s much easier to damage them than to improve them. Once you’ve achieved your goal of having an excellent credit score, make sure you maintain it by paying your debts on time and in full and being a responsible cardholder.
Excellent Credit Offers Recap
Excellent Credit FAQs. What People Ask About Cards for Excellent Credit
There are many reasons why having an excellent credit score, or at least a good credit score, is important. As it’s an indication of your creditworthiness, your excellent credit score will help you with your approvals for various types of credit; it can get you better insurance premiums, help you find a place to rent, get you lower rates and fees, higher credit limits, and more.
As long as you maintain your excellent credit score, you’ll enjoy greater financial stability.
Improving your credit score is a long process that will take a lot of dedication and hard work. To improve your score, you’ll need to improve every factor that is taken into account when calculating it. This means reducing your credit utilization rate, paying all your debts and bills on time, keeping your credit accounts open for boosting account history, avoiding frequent hard inquiries, mixing your credits and managing all of them responsibly, and more.
You will need to be consistent and use credit products that you can successfully manage. Make sure that all your credit activity is frequently reported to all three of the major credit bureaus (explained).
Yes, you can damage your excellent credit score. Unfortunately, damaging your credit score is much easier than improving it, so you’ll always want to be careful with how you use your credit cards and other types of loans.
Your credit activity will be reported to all three of the major credit bureaus, and most lenders and credit card issuers are fast to report negative behavior. Stay responsible, pay off your debts, don’t carry a balance, don’t max out your cards.
How long it takes you to get to an excellent credit score depends on many factors, whether you’re just starting your credit history, whether you’re starting from a poor credit score, whether you’re recovering from a bankruptcy, and more.
Unfortunately, it’s a long process that can take several years, but you’ll notice changes almost as soon as you start behaving as a responsible cardholder. Pay your debts on time, don’t carry a balance, keep your credit utilization low, don’t apply for multiple lines of credit at the same time, keep your credit accounts open even if you’re not using them.
Since the credit score is such an important financial matter, it makes sense you’d want to know what yours is. You can check your credit score by requesting a copy of your credit report from one of the three major credit bureaus – Equifax, Experian, and TransUnion. You can receive an annual copy of this report for free once a year, or check other available offers.
It’s often a good idea to request a copy of your credit report from all three of the bureaus, not just one. This way, you can examine the report for inconsistencies or mistakes. Make sure to contact your credit reporting agency within 30 days of receiving the credit report if you notice any errors.