Thursday, August 14, 2008

Want to be a FICO High Achiever? Do What They do

"If winning isn't everything, why do they keep score?” -- Vince Lombardi

After reading yesterday's column (link here) on FICO scorecards, I think we can all agree that we're in competition with one another, even if we never realized it -- and even if we don't have the mindset to beat the crap out of each other. In a perfect world, we wouldn't even have to worry about FICO; we'd just get approved for everything we applied for and we'd live happily ever after. Oh that we lived in that fairytale world. That not being the case, I suspect that a great many of you care about your credit score. I know I do. Which leads me to today's story.

I have always tried to surround myself with winners. I figured that their winning ways would rub off on me. Indeed, whenever I got a chance, I'd pick their brains so that I could see what it takes to win. I figure that same philosophy can be used to garner higher FICO scores, too. If you want to know what it takes to be a "FICO High Achiever," which is someone who has a score of 760 or better, then you should watch what they do and try to emulate it.

If you've ever pulled your FICO score through, then you've seen these references to FICO High Achievers before. Today's column is about highlighting some of the key attributes that FICO High Achievers share. I recently pulled my own credit scores (from all three bureaus). I'm a FICO High Achiever on my TransUnion report and my Equifax report. My Experian report was slightly under 760 (753), which means I have a little work to do there.

Rather than guessing, I decided to comb FICO's Web site to see if there was a list of things that these FICO High Achievers do. I was able to find quite a bit of them. I thought my readers would be interested as well. In no particular order, here they are:

On average, FICO High Achievers have 12 accounts. Those accounts could consist of mortgages, automobiles, credit cards, and so on. A quick look at my own credit reports shows that I have well in excess of 12 accounts. This could be a reason for my sub-760 score on Experian. Unfortunately, there's nothing I can do there. Still, those accounts aren't hurting me enough to keep me from being an overachiever when it comes to my Equifax and TransUnion scores.

FICO High Achievers carry, on average, some $5,000 in non-mortgage balances. Between my student loans and car payment, I am above well above $5,000 in balances. My credit cards, though, don't hurt me at all, since I don't keep balances on credit cards. I guess that's a small victory -- but it's still not enough to keep me on par with my High-Achiever peers. This is an area where I can improve.

FICO High Achievers are rarely late on their payments. What's more, only 1% have been 60 days late. I've never been late, so I this is probably an area where I get most of the points possible. Chalk one up for me.

These same High-Achievers have six accounts that are paid as agreed. All of my accounts, many more than six, are paid as agreed. I imagine that I am doing just fine here. I'll continue to pay as agreed. Enough said.

The FICO High Achiever has a credit history that averages between 6 to 12 years old. Over the past several years, I have added a slew of new accounts to my credit report. As a result, my average age is four years old. If I lay off the applications, my average age will continue to rise. This is an area where I could pick up some points.

This is one that I have struggled with during the past three years. My FICO High Achiever pals typically don't open many accounts. On average, more than half of my High-Achiever peers did not open an account during the past year. Of those who did, 27% opened just one account. Obviously, this is an area where I can improve. Given that I will be getting a new car at the turn of the year, I'll have to work on this one afterward.

Not only were my High-FICO peers not getting many new accounts during the past year, they also weren't applying for anything either. On average, 72% of them had no applications during the past 12 months. of those who did apply for something, 20% applied for just one credit product. All I can say is that I've been having more fun. Neener neener (sticks tongue out). I'm not promising anything, but we'll see what happens after I get my car. We'll see if I can refrain from applying for a new loan product during 2009. But I wouldn't hold your breath. Wink, wink.

One thing that FICO High Achievers have in common is that they do not miss payments. Some 93% of them did not have a single missed payment on their credit report. Of those few who did have a missed payment, it occurred about four years ago. I've never missed a payment, so I'm doing well here. I don't plan on ever missing a payment, so I'm not going to worry about this category. Still, if you're taking notes at home, don't miss payments.

Another thing that sets these FICO High Achievers apart is age. On average, their oldest account is 19 years old. Doing the math, and assuming that these people got their first account when they turned 18 years old, the earliest that someone could be considered average in this group is 37 years old. For my younger readers, this message is for you: time is your friend. This is a marathon; not a sprint. As your accounts age, you'll pick up FICO points.

Meanwhile, their oldest revolving account is 19 years old as well. I guess this means that people in this group, given our previous entry, open a revolving account first. My first account was a credit card. I'm not surprised by this factoid. My oldest revolving account is 21 years old. Unfortunately, it fell off my report a few years ago. My oldest revolving account is now 19 years old. Call me average.

Our FICO High-Achiever friends have no public records. No tax liens, no bankruptcies, and no foreclosures. They avoid these like the plague. Call me average again. I've never had any of those.

On average, FICO High Achievers opened their most recent account some 27 months ago. Hell, my most recent account was opened less than 27 days ago. You could say that I have some serious work to do here. But 27 months? Let's say that it would be an ambitious goal if I said that I would not open an account for that long. In fact, let me go on the record now. I'm not interested in holding out for 27 months. I guess I won't be getting a score of 850 -- ever!

Finally, FICO High Achievers keep their utilization very low. On average, their utilization is just 7%. This is an area where I crush my competition. My utilization is always around 1%. I've noticed that when I have 0% utilization, my scores dip just a bit. That's because FICO rewards people for using their credit on a regular basis. If I had no utilization, FICO would ding me because it doesn't take much skill to refrain from using credit. Makes sense to me.

This list is not exhaustive. A search of the Internet would turn up a few more things that FICO High Achievers do. But I've hit on the major ones.

If you're interested in maximizing your FICO score, you now know how High-Achievers do it. As for me, I am fairly content with my current scores -- even if I have a long way to go before I hit 850. Still, at 760+ on two of my scores, I am given the best rates, never get turned down for credit, and have little to worry about. Quite frankly, I'm just fine with that.

You'll have to figure out where your sweet spot is. FICO High Achievers have shown you the way.

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SpaghettiBender said...

At my age, 53, I don't think I will ever see the 800's. But, I am happy to be in the 700's!

Credit Matters said...

SB, I was beginning to wonder if anyone would post a comment today at Credit Matters. It's been a strange day. Traffic has been brisk, but no one has stopped by to say hello.

Glad you dropped by, though. Don't sweat the 800s. Get 760 and above and you'll be golden.

Anonymous said...

Keep posting!! I want to catch up! I don't really care if I'm in the 800's and don't use that score--what would be the point? I'm happy to be in the 700's too. I'd rather have credit aka options. I'll follow your lead. Thanks.

Credit Matters said...

I was getting lonely, Anon. Glad to see that I'm not the only one who feels that having a high score -- and not using it -- isn't very fun.

As long as I keep my scores above 760, I'll be as happy as a clam.

Thanks for the post.

Insult Comic Dog said...

Detail of 835 EX score (from 2006):

lhslancers said...

SB I have 3 years on you and I plan to be in the 800's in a few years. Marcus I am sure that at some point in time you will have all you need and the apps will come to an end.

Credit Matters said...

Lancers, that is true. I know it's true. Sadly, I will no longer have anything to apply for. And then the 800 score will come. And I'll have no use for that 800 score. Ha!

Thanks for being a first-time poster, by the way. Come back often.

lhslancers said...

I read you over at CB all the time. Great blog Marcus. Maybe you can put a compilation together and sell it to the public school system.

Credit Matters said...

I plan to write a book after law school. I just don't have the time right now.

But I needed to get this information out of my head. That's why I created the blog. Not sure if I will be able to keep this pace up while in school. For now, I am doing fine. I'm staying a week ahead. I am currently eight stories ahead (meaning I have almost two weeks' worth of stories in the hopper; they're ready to go).

If I can stay ahead, then I may be able to write daily. If it gets too tough, I may cut back to three stories a week. We'll just have to see.

Anonymous said...

Remember 850 can only be achieved on one CB in one score bucket. No need to fret about getting that high. 825, OTOH, should be considered reachable.

Big Bear said...

Another great article here at Credit Matters.

For me, I have TransUnion and Equifax at or above 760, but Experian is lacking my oldest account and is thus stuck in the 720s.

The delta of two years for the oldest accounts on my reports makes things difficult for the future. On one hand I want to get EX up to the 760 mark as well, and besides waiting another 24 months, I want to work on average age.

We'll see how that works out in the coming months, as holding out on new applications seems unlikely.

Credit Matters said...

Big Bear, I hear you. I find it tough to sit still when my scores are sitting pretty.

I'd rather have grab a few more tradelines than sit on a higher-than-necessary score. I've found that having scores in the mid-700s does the trick.

When I get to 800 that's just for bragging rights.

Big bear, your scores are excellent right now. You'll get approved for most anything you apply for at this point. Get that Experian score up and you'll be golden.

Keep up the good work.

Anonymous said...

Hi Everyone, and to CreditMatters!

Well, I need some advice. I'm a dual citizen, Canadian/American. After working for one of the big 3 and living in Canada, I wanted to establish myself financialy in the U.S. My mother living in West Virginia has made me her sole heir, so I opened a Chase chequing account in 2006, and in 2007 received my first U.S. Chase Rewards Platinum No Fee Visa. A $1,500 credit limit Woohoo! My CIBC Aerogold Visa has a $25,000 credit limit and I've been a American Express Platinum Member since 1998. Well, since they did not have me existing in the U.S. Credit System, I can't blame them.
Well, every 4 months I get a $500.00 automatic credit limit increase. Not bad. It's at $3,000 a month now. I use it up to $400.00 a month, but no more than that. It's for my Directv subscription and for sometimes at Borders Bookstore which was the first place I used it.
I would like to go to Chase and get an Unsecured Personal Line of Credit to build my finanical history. Take part of that money and place it in my chequing account, and pay back the line of credit from my chequing account through a Pre-Authorized payment plan over 12 months. I think the small amount of interest I pay will reap benefits for me credit wise.
I have a pre-approved American Express Green card application mailed to me. Should I get the card from Amex first, and then the line of credit? Which order should I do it, and in what time frame?
Thanks again!
Robert, Detroit/Windsor border guy.

Credit Matters said...

Robert, if it were me, I would grab the American Express card first. That's because most of us don't use our lines of credit. They're there for a rainy day only.

You'll use the American Express card on a regular basis, though, which will allow you to demonstrate your regular use of credit.

I have a couple lines of credit. I have never used them. I use my credit cards on a regular basis.

Get the credit instrument that you'll use regularly. Then get the instrument that you need in a pinch. Thus, Amex first. LOC, second.

That's how I would handle it.

Anonymous said...

THANKS Credit Matters!
WOW! I took your advice, but when I looked at my pre-approved invitation the date was April, 21 2008. Taking a chance I went to the Amex website and typed in the R.S.V.P. number. It had expired. DAMN IT! I thought to myself. Then I read your article on your credit card portfolio. You had a link to Amex's webpage for a soft pull to see if a person qualifies before handing an application in for a hard pull. Well, I went there, typed in my info, and there was a response page that said, "CONGRATULATIONS! You quailfy for these American Express Cards." There were 5 cards. Gold, Green, Blue, Blue Sky, Hilton Honors. WOW! I applied for the Gold of course :) and within 60 seconds I was approved. It says I will get the card in 7-10 days. Thanks again Credit Matters.
Robert, Detroit/Windsor border guy.

Credit Matters said...

Robert, congrats on the Amex approval. Glad to see that you're having success.

Not sure if you've read my write up on American Express, but you may want to read that one now. It's something that all American Express cardmembers should read.

Onward and upward, Robert.

Congrats again.

awedio said...

speaking of AMEX, CM, is a CLI a soft or hard pull?

Credit Matters said...

Awedio, it's a soft pull unless they tell you otherwise. I take it you're referring to the Amex Web site? It's a soft there.

Anonymous said...

Something to keep in mind -- most people with sizable wealth do many things through various companies and trusts. This is most likely why they don't seem to have any negative public records in their records.

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