Consumers don't build great credit scores overnight. It's something that takes time, smart financial decisions and maybe even a little luck.
Perhaps surprisingly, it turns out a lot of Americans have managed to make the effort. As a whole, we've actually got pretty decent credit scores. Nearly a third of all consumers have a FICO score from 749-799, according to the credit scoring firm, which uses a scale from 300 to 850. Generally, the closer you get to 800, the more likely you are to get great rates and terms on a VA home loan or other lending options.
More than 50 million people have a 785 score or above, according to FICO. The company considers this top tier its "High Achievers," and last fall credit experts there noticed some key patterns emerging within this high-scoring demographic.
There aren't any secrets or quick fixes when it comes to boosting your credit score. Rather, it's a simple approach that relies on tried-and-true methods often utilized by those with sky-high credit scores.
Here's a look at five of those methods:
Keep Balances in Check
It's critical that consumers avoid maxing out their credit cards and strive to keep their balances to 30 percent or less of their credit limit. That means paying down balances and keeping a closer watch on your spending. But having a balance in and of itself isn't necessarily a major problem. FICO's analysis found that their "High Achievers" had an average of four cards with balances.
Always Make Payments
Late and missed payments are absolute credit score killers. Your payment history accounts for 35 percent of your credit score, and late payments (which come in 30-, 60- and 90-day increments) can decrease your score by as many as 110 points. Staying on top of credit card and loan payments can be tough for military borrowers, who are often on the move. Only 4 percent of those 50 million high-scoring consumers had a missed payment on their report.
Build a History
This one is often frustrating to hear, especially for younger borrowers. But the length of your credit history accounts for 15 percent of your score. On average, those high scorers had been building a credit profile for 11 years, according to the FICO analysis. Going way back, the company found that consumers opened their first credit account, on average, 25 years ago. That doesn't mean young consumers can't break the 785 score barrier. But it can take some hard work and dedication.
Careful with New Credit
It's not just older credit accounts that get all the attention. High-scoring consumers also know how to use new credit accounts responsibly. Applying for every credit card offer you get in the mail isn't going to help your score. In fact, it's going to hurt your credit profile. Opening a rash of credit accounts or having a bunch of companies pull your score in a short period can be a red flag for FICO's scoring formula. On average, the newest credit account for those high achievers was 28 months old, according to the analysis.
Bad Things Happen
Consumers with top-tier credit scores make mistakes, financial and otherwise, and some of their actions translate to their credit report. FICO found that 1 in 100 consumers had a collection on their credit report. Often what sets these high scorers apart is that they understand credit scores are fluid. One missed payment or one collection encourages them to work even harder to keep balances low and pay bills on time. They know they can take action to raise their score, just as action or inaction led to their score's decline.
This post originally appeared at VA Loans Insider.
Chris Birk is director of communications for the VA Mortgage Center, which specializes in VA loans for veterans and active duty service members.