5 secrets of credit score overachievers

By UK CreditCards.com

Some consumers have incredibly high credit scores and, as a result, they tend to qualify for better interest rates, juicier rewards and other big incentives reserved for those with excellent credit.

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Here are five rules these credit score overachievers always follow in order to keep their credit ratings in excellent shape:

1. They pay their credit card bills on time.
This may seem obvious, but it is something you might not immediately consider. Your payment history is a big part of your credit report and can make up to 35% of your score. Any collections or judgments on your credit report will have a significant impact. However, it doesn't have to be that serious for lenders to take notice. Just one late or missed payment on a credit card or loan repayment could cause serious damage to your credit score. Most credit score overachievers have never been late to pay their credit card bills, or any other types of bills. And for those that have, the late or missed payment likely occurred a number of years ago.

2. They keep a low credit utilisation ratio.
If you have decent access to loans, overdrafts and credit cards because you have a good credit score, don't use too much of it if you don't have to. Most credit score overachievers improve their credit rating by not using all of the credit available to them, thus keeping their credit utilisation ratio low.

A consumer's credit utilisation ratio can be described as the ratio of credit available to credit used. For example, if you have a credit card with a £500 limit, and you have used £100 of that, your credit utilisation ratio is 20% -- not bad.

Credit score overachievers always make sure to pay down all or most of their loan amounts so that they are not using up too much of their credit limits and negatively impacting their credit utilisation.  

3. They remain consistent throughout the month -- and even year.
The way in which your credit balances are reported to the relevant bureaus means that you cannot trick your credit report and lenders into thinking that you do have a low utilisation by paying off high balances in full at the end of the month. 

If the outstanding balance on your credit card is high when your lender sends off the data, your credit utilisation will be very high, even if you go on to clear the balance at a later date.

All credit card issuers and loan providers report this information at different times, some every 30 days, some every four weeks and some even quarterly, so it is impossible to tell when you should pay off the balance.

Those with extremely good credit scores will always pay their bills on time, keep a low utilisation whenever possible and rarely owe more than around £400 at any time. 

4. They use different types of credit.
Credit score overachievers open up a moderate number of different types of credit accounts, such as credit cards, bank loans, overdrafts or car loans. This helps improve their credit rating because it demonstrates to the lenders that they are able to manage debt responsibly and use the appropriate form of credit for different things.

However, they don't go overboard. Opening up an abundance of credit accounts can actually harm a credit score because someone who has multiple credit lines may be seen as a higher risk.

5. They monitor their credit reports.
Credit score overachievers check their credit reports regularly and monitor them for inaccurate information, which could have a negative impact on their scores.

You too can access the same information and see what lenders see about you. The Consumer Credit Act 1974 gives every single person in the UK the right to obtain a copy of their credit report. There are three agencies in the UK that keep this information on file, and they pass it over to lenders who then make decisions based on what it says. It is up to you to make sure the information in these reports is accurate so that lenders can make a fair decision. 

See related: How to boost your credit score; Study: Many Brits lack key knowledge of credit scores

Published: 19 July 2011