Common knowledge is that it takes years and a mix of several different kinds of trade lines to build up a high score. We'll see by the examples below that this is not necessarily true.
It is true that to have little credit history is equal to having bad credit. But it is not as hard as one might think to build up a great score from nothing. Of course, you must always pay on time, and have no derogatory items (such as collections, judgments or charge-offs) to maintain a high score. The examples shown below have done that.
Now let's look at 2 actual real-life examples:
Total number of Trade Lines is three.
1st one is a credit card , opened 7 months ago. The High Credit (amount available) $500. The balance is 63, the minimum payment is $25.
2nd is an auto loan, opened 42 months ago. High Credit $3000. This account was satisfied in 18 months and has 0 balance.
3rd is a $1000 credit card opened 66 months ago. It has a 0 balance.
Pretty minimal number of trade lines and amount of borrowing power, yes? What would you guess the credit score to be? Maybe 680 at best?
Number of trade lines is two.
1st one is a credit card opened 5 months ago. The balance is $63, the minimum payment is $25.
2nd one is an auto loan. It was opened 33 months ago. High credit was $5836.
It has a 0 balance.The "months reviewed" is 2. This means the loan was payed off early.
Do you think that just 2 trade lines could achieve a 680 score? Maybe?
Both accounts have had 2 inquiries in the last 12 months.
Both of these accounts have Key Factors impacting the score of:
1. Length of time Accounts have been established
2. Length of time revolving accounts have been established
3. Too many inquiries in last 12 months
4. Proportion of balances is too high on bank revolving or other revolving accounts
Now what do you think?
(drum roll, please)
Score #1: 786
Score #2: 741
Interesting, isn't it?
What have we learned?
even if you have the highest possible score!
To have an excellent score:
And by the way, our examples are 23 and 22 years old!
Go forth, use credit accordingly, and prosper.