There are myriad reasons to work toward excellent credit, including the fact you can save money with lower interest rates over time. With a “very good” or “exceptional” FICO score, or any score over 740, you can typically qualify for the best loan terms, too. This means having more flexibility when you borrow, and being able to pick and choose from available loans instead of settling for what you can actually get.
And let’s not forget the other obvious benefits of good credit — greater ability to qualify for a mortgage, an apartment, or a car loan. Having good credit can also help you score lower insurance rates, which yields even more savings over your lifetime.
But, how do you achieve the seemingly elusive marks of excellent credit? The factors that can make or break your credit aren’t as complicated as one might think, and plenty of people achieve scores well over 750 without breaking a sweat.
We profiled some everyday people with good credit to find out how they moved up the ranks and boosted their scores over time — as well as their advice on how others can do the same.
Janet Berry-Johnson, age 42
Current credit score: 809
Her credit story: While Certified Public Accountant (CPA) Janet Berry-Johnson has superior credit now, it wasn’t always true. She sold a home she owned with her ex in a short sale in 2011, which tanked her credit in a hurry. Berry-Johnson said she carried approximately $10,000 in credit card debt at the time, and that her creditors lowered her limits after her short sale occurred. This caused her credit utilization — the second most important factor in your FICO score — to skyrocket, which caused her score to drop even further. At her lowest point, her FICO score was somewhere in the mid-600’s.
How she took control: To get a handle on her credit score and prevent further damage, Berry-Johnson put all her credit cards on automatic payments. She also avoided applying for new credit for a few years and focused on paying off existing balances. In 2014, she says she applied for a co-branded credit card with her local grocery store. “My initial limit was really low, but I just charged groceries to it and paid it off in full every month,” she says.
How she uses credit now: Berry-Johnson now has 10 different revolving accounts on her credit report — nine credit cards and one revolving account at a furniture store. She mostly uses her cash-back credit card so she can earn rewards on regular spending and subscription services like her Netflix account. While she normally pays her balance in full, she has a balance right now because she just paid for a spring vacation with credit.
Best advice: “If you have a lot of credit card debt, the best thing you can do is pay it off and make your payments on time,” says Berry-Johnson.
“Set up automatic payments so you don’t accidentally miss a payment. Do whatever you can to avoid charging anything to your credit cards until they’re paid in full.”
Jacob Wade, age 33
Current credit score: Low 800’s
His credit history: Wade says unfortunate credit decisions made in his early 20’s caused his credit score to spiral into the mid-600’s. When he started focusing on improving his credit, he had approximately $3,000 in credit card debt and $16,000 in student loans.
How he took control: Wade says he spent over two years paying off his credit card debt. He also signed up for a grocery store credit card and learned to use it as a debit card, paying it off several times per month to stay on track. Over the course of three years, paying off old debts and paying his new credit card balances in full each month boosted his score to approximately 720.
How he uses credit now: Wade, who now teaches others about the value of financial responsibility at IHeartBudgets.net, says he has purchased a home, got his own car loan, and signed up for several credit cards over the last decade. He hasn’t paid any interest on credit card debt since his initial foray into debt in his early 20’s. These days, his score is in the low 800 range and he has eight different credit cards. “My wife and I each have our own card for daily expenses,” he says. They use their cards to earn rewards on their regular spending, making sure to pay their balances in full each month.
Best advice: “Get on a budget,” says Wade. If you cannot handle your own money responsibly, you aren’t prepared to borrow from others.
Also consider using your credit card “like a debit card” if you can. In other words, only use credit for purchases you have cash in the bank to cover and never, ever carry a balance. No exceptions.
Kelan Kline, age 28
Current credit score: in the high 700 range
His credit history: While Kline’s credit score is higher today, it’s been a journey to get there. He says both he and his wife had basically “nonexistent credit” when they entered college in 2008. “Neither of us had really used credit before so we were both starting at the bottom.”
How he took control: Initially, Kline and his spouse each applied for a credit card with a low limit, and they would use them for small purchases they could pay off right away — things like groceries and gas. They used the experience to get in the habit of paying off their balances in full each month, which helped them build a history of on-time payments and keep their credit utilization low. Each year the pair would also sign up for a different credit card with a good bonus and keep their old credit cards open with a zero balance. “This helped us create more lines of credit and continue to build our credit history,” he said.
Recommended Card for Building Credit
How he uses credit now: Currently, Kline and his spouse have six lines of credit open, including three credit cards they use to earn rewards on regular spending. “We use our credit cards to pay for everything we can to earn as many miles as possible,” he says. “Our average spending on our cards ranges anywhere from $1,500 to $3,000 per month, and the balance is paid in full each month.”
As a side note, the pair also just paid off $25,000 in student loans.
Best advice: The easiest way to improve your credit score is learning how credit works, says Kline.
“By simply making on-time payments, keeping your credit utilization ratio down, and having multiple lines of credit you keep open, you can quickly see improvements on your credit score.”
Kate Horrell, age 49
Current credit score: 850
Her credit history: Having a credit score of 850 is something to be proud of, but Horrell didn’t take the easy road to excellent credit. In fact, she once had terrible credit, mostly because she paid all her bills late. “I was over the limit on my credit cards, and I was broke,” she says. “I was paying late fees and over-the-limit fees almost every month.”
How she took control: Horrell, who now works as a financial educator for military families, first got a handle on her credit by becoming current on her payments so she could avoid costly late fees. From there, she focused on reducing her credit card balances by making extra payments every month. Horrell also set a goal to become completely debt-free within five years, a feat she achieved by budgeting her money each month and paying all her “extra” income toward credit card balances.
How she uses credit now: Horrell is currently free of credit card debt, but she still uses three different credit cards for convenience and rewards. She always pays her balances in full each month to avoid interest, and she frequently pays her credit cards off more than once per month.
Best advice: “Be consistent,” she says. “Make your payments on time and reduce your balances. There’s no magic cure or secret sauce — you just have to do the right thing every month.”
The bottom line:
These stories prove that, no matter what anyone says, there’s more than one path to great or exceptional credit. Some people hit rock bottom before they find a way to take control of their finances and their lives. Fortunately, the way credit scores are determined makes it possible for consumers to redeem themselves over time.
If your credit isn’t great but you hope to improve it one day, the techniques mentioned in this piece will help. Pay all your bills early or on time, create a plan to pay down debt, get on a budget, and only use credit for purchases you can afford. If you take those steps, everything else should fall into place.