Keeping your credit in tip-top shape is a noble and worthy goal considering the important role it plays in major lending and business decisions. But what if, despite your best efforts, your score has reached a plateau? One reader of Credit.com reporter Christine DiGangi’s personal blog writes on this problem: “One of my goals is to reach a FICO score of 800 before I’m 27 (I’m 25 now). I’ve been at 780 for about a year, but I’ve hit a plateau. What can I do to improve it?”
Credit Plateaus Are Common
While there may be things you can do to improve your credit, such plateaus, especially among young adults, aren’t uncommon. Credit history is major factor in credit scoring models, and while your age doesn’t matter, the age of your credit does and older consumers tend to score higher since they’ve had more time to build up their credit. Credit scores also reward consumers for having a diverse portfolio of accounts, so if you’ve yet to purchase a car or apply for a mortgage, you may have a hard time.
You could bolster your credit score in the long-term by adding a different type of account. For instance, if all you have is installment debt, in which you pay a fixed amount over a period of time (i.e. student loans, auto loan), then adding revolving debt such as a credit card could raise your score. The same works by adding an installment loan to your revolving-only credit history, but only if you manage the credit responsibly.
It’s important to note that your credit could take a small hit when you first add financing. Credit applications generate hard inquiries, which could ding your score a few points for a short period of time.
Patience Is Required
Don’t worry or act impulsive if you’re falling just shy of your goals. Most credit scoring models use a scale of 301 to 850, but lenders generally award their best rates to credit scores of 750 or higher. (Fannie Mae’s most favorable loan level price adjustments for mortgages are capped at 740, for example.)
If you keep up the good behavior, your score should simply rise over time. You can achieve the best credit score results by making payments on time, keeping debt ratios low (below 30% and ideally 10% of available credit) and adding new credit lines as needed — or when you can pay them. You can track your progress by viewing your free credit report summary each month on Credit.com.
More on Credit Cards:
- Credit.com’s Expert Credit Card Shopping Tips
- How to Get a Credit Card With Bad Credit
- How Secured Cards Can Help Build Credit
Image: Ingram Publishing