What is Excellent Credit? How to Reach the Highest Level of the Credit Score Range

I can recall it as if it were yesterday — my grandnephew, Finn, striding into the living room, his face beaming. It was the first day of first grade, and he proudly held up a crayon drawing adorned with his teacher’s big “Excellent!” 

His little chest puffed up with pride, and he excitedly asked for a new toy as a reward. You see, when you’re six, “excellent” feels like you just hit the jackpot, and let’s face it, kids love awesome rewards. Plus, he knows I’m a soft touch.

If you like awesome rewards, then I suggest you aim for excellent credit. “Excellent” (or “exceptional” in FICO-speak) is the top credit status you can earn. 

Excellent credit is typically a credit score between 781 and 850, providing access to the top financial products with the lowest interest rates and best rewards.

Creditors offer their best terms and conditions at this score level, from low interest rates to premium credit card perks. 

I’ll explain what excellent credit really means, why it’s worth striving for, and how you can climb your way to the top of the credit score ladder. Along the way, I’ll clear up some common misconceptions and share tips for keeping your score shiny and bright.

Ever wonder why your credit score matters? It’s a financial report card, clueing you into how lenders view your creditworthiness. The higher you score, the better your interest rates and borrowing power. 

If top-tier perks ring your bell, it’s worth your time to understand what exactly is involved in credit scoring and how scores are calculated, along with what actions can boost your score or drag it down.

A Measure of Your Creditworthiness 

Credit scores are numbers indicating how likely you are to default on your debts in the next two years. Lenders use credit scores to get a handle on the risk of lending you money. 

It’s simple enough: with a higher score, the less likely you’re down and out, and creditors will be willing to give you better terms.

Most credit scores run anywhere from very poor (300) to perfect (850), with each level impacting what creditors are willing to do for you. 

Excellent credit scores put you in the driver’s seat — you’re in a great place to attract the best interest rates and highest credit limits. If your score is more listless than lustrous, it behooves you to understand what qualifies as excellent credit.

You must set goals to repair your credit. To get there, you need to know your current standing and what the credit score models require to elevate you to the top tier.

How FICO and VantageScore Calculate Credit Scores

The two big dogs in the credit scoring world are FICO and VantageScore. Each uses several factors to compute your score. They both predict the likelihood that you’ll repay money you’ve borrowed, but they weigh their scoring factors differently.

Here is a chart that shows the factors the two scores take into account:

As you can see, FICO strongly focuses on your payment history — it is the single most critical factor influencing your score. VantageScore emphasizes a good mix more than FICO does, and it is more lenient when scoring credit newbies. Knowing these differences will help you figure out why your scores never seem to match.

Influential Factors in Both Models 

Both models share several factors that sway your credit score. Factor one is making on-time payments: They are the top priority for both FICO and VantageScore when calculating credit scores. Always making timely payments is so critical because it demonstrates that you are a responsible borrower. 

Another critical factor is the amount you owe in general and your credit utilization ratio in particular. This ratio is the amount of your outstanding credit card balance divided by your credit limit. Here is an example of how credit utilization ratio is calculated based on a person who owns three cards:

Maintaining this value below 30% can boost your score because it shows that you are not overly reliant on borrowed funds. 

Whereas keeping old accounts is smart, closing them reduces the length of your credit history and raises your credit utilization ratio. Both hurt your score.

The more years of credit history you rack up, the better your score. Keeping your older accounts open helps to fortify your credit score. That’s because creditors feel more confident about you if the information they receive flows from long-lived accounts — it’s an indication of your financial stability.

However, not all actions work to your advantage. Missing payments or carrying high balances can quickly drag your score down. So will many new accounts opened at once, as this often signals financial distress. 

Excellent credit is the golden ticket to Willy Wonka’s chocolate factory. Instead of candy, though, it’s filled with the sweetest financial perks around. 

You can luxuriate in those tasty, low-interest rates that allow more money to remain in your pocket, easy loan approvals, and credit card offers that will astound your friends and confound your enemies.

It’s not just about the numbers; it’s living your best financial life, with lenders practically beating down the doors to offer you the yummiest deals in town.

Lower Interest Rates

Perhaps the juiciest benefit of excellent credit is knocking down your interest rates. You can apply for a credit card or loan knowing you’re in control. 

Lenders can’t help falling over themselves, giving you the best rates with the belief you’re going to return their money without a single hitch. You’re the teacher’s pet, but instead of gold stars, you get deals that save you a ton of money over the years.

Lower interest rates save you from shelling out extra cash just to borrow some money, be it for a mortgage, a car loan, or maybe even just a credit card.

With an excellent score, credit cards become your good friends. If you keep your top credit standing, chances are you’ll get a card with a super low regular interest rate and perhaps an introductory 0% APR for up to 18 months. That’s a long time to sidestep interest payments as you finance your purchases.

Achieving exceptional credit is like living under a giant financial safety umbrella, a place you will never want to leave.

Easier Approval for Loans and Credit Cards 

If the word “no” sends you into a tantrum, banish it with an excellent credit score. Need a sizable personal loan? Not a problem! Want a premium credit card? You got it! Creditors practically roll out the welcome mat because they know you’re a safe bet. 

It’s not just a matter of getting approved — oh no, it’s about getting approved for more. Excellent credit does not only open doors; it swings them wide. Lenders stand ready to give you higher loan amounts or credit limits because, in their eyes, you really know how to manage money.

Whether you’re looking at a new car, renovating your house,  or lining up credit for a rainy day, an excellent score gives you the freedom to borrow what you need when you need it.

Moreover, with excellent credit, approvals go through as quickly as a hot knife through butter. Lenders will pre-approve your loan and streamline your application, giving you the money in less time than it takes to say, “Approved!” This comes in handy when a lot is at stake — like, locking up a house in a hot market.

The best of all is that when you have excellent credit, you drive the negotiations. Be it low interest rates or much more favorable loan terms, your sterling credit rating puts you in the position to demand what you want. 

Better Terms and Conditions

Now, with gold-plated credit, lenders will want to sweeten the deal for you. This means better terms of service, starting with higher credit limits.

You also get more financial flexibility to do what you want in life without being concerned about maxing out your cards. 

Oh, and let’s not forget those swanky credit card rewards programs that start coming your way when you’ve got excellent credit. Be prepared for cash back offers and travel points galore, plus other perks, such as upgrades to first class.

If you are sitting pretty with excellent credit scores, lenders will come up with flexible options suiting your lifestyle.

It may mean bargaining for reduced fees or interest rates or lining up a repayment plan that best fits your needs. 

Since you are reading BadCredit.org, I’m assuming that many of you would love to rebuild your credit. Building up great credit is not just about numbers on a screen but also how you can set yourself up to gain financial freedom and peace of mind. 

I’ll walk you through smart financial practices that’ll get your credit score moving in the right direction, from making timely payments to managing your credit utilization and keeping tabs on your credit reports.

Always Pay On Time 

Unquestionably, the Golden Rule of Credit is never to be late. Your payment history is the backbone of your credit score. Every on-time payment earns a small pat on the back from the credit gods. Over time, you’ll prove to lenders that you are dependable and trustworthy.

Can’t say it any plainer: If you want a great credit score, then pay your bills on time, every time.

But what if you miss a payment? It hits your score if you’re more than 30 days overdue. Think of a missed payment as a weed sprouting up in your garden: Left unattended, it will choke off the health of your credit score little by little. The longer the bill is left unpaid, the worse it gets. So nip any late payments in the bud before they do serious harm. 

The most damage stems from collections and bankruptcies — they are pests that can ravage your credit garden. If an account goes into collections or you declare bankruptcy, the results can be near-fatal wounds to your credit report, some of which may take a decade to heal.

These red flags tell lenders you’re a high-risk borrower. They damage your approval odds for new credit and push away the low interest rates you’ve been coveting.

Keep Your Credit Utilization Low

Another key to excellent credit is keeping your credit utilization low. Basically, what this means is that you shouldn’t come close to maxing out your credit cards. As I mentioned earlier, you must keep your credit utilization ratio below 30%, hopefully well below, to have any hope of earning an excellent credit score.

That shouldn’t surprise you. A high ratio tells lenders you’re relying too much on credit, which implies that you are managing your money poorly.

FICO and VantageScore approach credit utilization a bit differently. While the former lumps it under the “Amounts Owed” umbrella, the latter spotlights it by pulling it out as its own factor. Either way, a high ratio is terrible news for the credit score.

If you have high balances, consider a balance transfer or a consolidation loan to bring that ratio down. Balance transfers allow you to move your debt onto a new card with an introductory 0% APR so that you avoid interest on the transferred balance during the promotional period. Just be sure to read the cardmember agreement carefully for any hidden gotchas.

Consolidation loans, on the other hand, combine all your debts into one that repays your credit cards, thereby reducing your utilization ratio. Both of these strategies can be super useful in helping to bring down your credit utilization, giving your credit score a nice boost.

Keep an Eye on Your Credit Reports

Finally, look at your credit reports often. The process of regularly reviewing your credit reports and scores is essential to keeping everything on track. You want to catch errors or fraudulent activity as soon as possible to minimize their harmful effects. 

Credit monitoring services are especially useful in this regard. They continuously monitor your credit reports, alerting you of changes and suspicious activity. While some monitoring services are free, others charge a fee. You might gladly pay the cost for the peace of mind these services return. 

If an error pops up on a credit report, it’s vital to move fast. It could be that your personal information contains a mistake or is lacking information. Worse, it could indicate that someone fraudulently opened an account in your name. 

Whatever the cause, dealing with it promptly may spare you from long-lasting score damage. You must contact the credit bureau and the creditor to dispute the error and include any corresponding documents to back up your claim. 

By reviewing your reports frequently, you can monitor how your financial choices are ultimately impacting your score so you can make whatever corrections are needed to get you back on track.

Where credit scores are involved, there is absolutely no shortage of myths milling around. These misconceptions can trip up even the savviest of people, leading to missed opportunities and useless stress. 

That’s why it’s so important, especially if you’re aiming to reach and maintain excellent credit, to debunk these myths. Cut through the confusion, and you can start making smarter decisions that will help your credit score soar while avoiding pitfalls that drag it down.

You Need a High Income to Have Excellent Credit 

I know firsthand that you don’t need a high income to have a good credit score. If someone tells you that you’ve got to pull in a six-figure salary to enter the top-tier credit range, don’t believe it. 

Here’s why: Credit scores aren’t about how much money you’re hauling in; they’re about how well you handle the cash you have.

In fact, your income doesn’t appear anywhere on your credit report. All that matters is how you’re managing your credit. And that’s my only hope, Obi-Wan: Pay the bills on time, keep those balances low, and don’t overspend. 

You don’t need to be a millionaire; if you practice good financial habits, you can get excellent credit.

Carrying a Balance Boosts Your Credit Score 

Another common myth is that having a balance on your credit card somehow improves your credit score. Some think that leaving just a little bit of a balance shows the credit bureaus you’re using your credit responsibly. Trust me, though: there’s nothing to it — carrying a balance isn’t necessary; it’s working against you.

Carrying a balance won’t help your credit score, and may actually hurt it if it ballons your credit utilization ratio.

Carrying a balance, especially a large one, increases your credit utilization ratio. The more this ratio climbs, the more it can pull down your score. Lenders may start thinking you’re too dependent on credit — and that doesn’t paint you in a very favorable light.

The best approach? Pay off your balance in full each month if you can. It keeps your utilization low and your score high. Plus, you’ll save on interest — that’s a win all around. 

Checking Your Credit Hurts Your Score 

Don’t be afraid to check your credit score just because somebody mentioned that it might damage it. This kind of myth keeps many people from knowing where they stand. Let me clarify this once and for all: There is a huge difference between a soft inquiry and a hard inquiry, and only one of them impacts your score. 

You’ve probably heard about soft inquiries. Some examples are when you check your own credit or when a company looks at your background to pre-approve you for a loan. The good news? Soft inquiries in no way affect your credit score. 

You could check your credit every 10 minutes all day long and receive not a single ding to your score. AnnualCreditReport.com even allows you to access your credit reports from all three bureaus as often as once per week — for free.

On the other hand, a hard inquiry occurs when a lender checks your credit after you formally apply for a loan or credit card. These can scuff your score a little, but the effect is usually small and temporary. 

The key takeaway? Regularly checking your credit is a healthy habit, and it won’t hurt your score.

It, in fact, helps you stay atop your financial condition so that you can address small problems before they grow bigger.

Other Myths

A few other myths deserve debunking. The first one is that once you earn excellent credit, you’re set for life. In fact, making sure you keep excellent credit requires ongoing work.

To continue to occupy the financial high ground, you must keep paying the bills on time, managing your balances, and, of course, monitoring the reports — everything that got you to where you are now. Resting on your laurels could cause you to regress to the lower credit tiers, to your everlasting regret.

Another common misconception is that your score will improve if you close old or unused credit accounts. While this may sound like a good idea, cleaning up your credit by closing unused accounts can actually do two negative things: shorten your credit history and lower the amount of available credit you have.

Both of these will lower your score. So, unless there’s a compelling reason for shutting them down (such as annual fees), it normally is best to let those sleeping dogs lie. 

Finally, many consumers think they have only one credit score. It’s more likely you have six — two sets of three. Each of the three major credit bureaus publishes its own credit scores, both FICO and VantageScore. That’s six where I come from. While based on similar raw data, each score is subject to unique handling. 

Excellent credit gives you great power, but with that power comes the great responsibility to keep things running smoothly. 

It’s not only about enjoying the perks or being able to relish better financing options. It’s also about remaining vigilant so your credit score remains strong. 

The credit doors open at your command — it’s up to you, once you enter, to keep them open by managing your credit wisely.