3 Habits of People With Great Credit

Image source: Getty Images

Having great credit makes your life easier and less expensive. When you have a top credit score, getting an affordable mortgage or car loan isn't a challenge. You can have your pick of lenders. Landlords will want to rent to you, companies will want to do business with you, and you could even get cheaper auto insurance .

So, what can you do if you want all of these benefits and perks for yourself? Just check out these three habits of people with great credit and see how many you can adopt in your own life.

1. Paying bills on time

People with great credit have one universal habit: They pay their bills on time every single time.

Payment history is the single most important factor that determines what your credit score is. It accounts for 35% of the FICO scoring formula (the most widely used credit scoring formula). It's important in other formulas as well. And even a single payment that's late by 30 days can have a devastating impact, sending your score down by 100 points or more.

To adopt this habit and make sure you never miss a payment, set up autopay for all your cards, loans, and other debts. Just be sure you keep a big enough balance in your checking account so your auto payments don't cause an overdraft.

In an ideal world, you'll have your autopay set to pay your credit card balance off in full. This is going to help you avoid expensive interest as well as assist you in establishing great credit. If this isn't feasible, you can still set up autopay for the minimum due so you can protect your credit history.

2. Maintaining a low credit card balance

People with great credit also use their credit wisely, but they don't go overboard. They never max out their cards, instead maintaining a pretty low balance relative to what they're allowed to spend.

This habit is important because credit utilization is the second most important factor in the FICO scoring formula, accounting for 30% of your score (and again, it's a factor in other formulas too).

The general rule of thumb is you absolutely should not use more than 30% of your available credit. So if you have a total credit line that would allow you to borrow up to $10,000, you would never charge more than $3,000 on your cards at a time.

A lower utilization ratio is preferred by the scoring formula, though, so if you want great credit, you'll need to do even better, keeping your credit used well below that 30% threshold. I have a credit score of 810, and I typically don't use more than 10% of my available credit.

Now, you can just limit how much you charge to accomplish this. But you can also make it easier by regularly asking your credit card company to raise your limit. You'll usually be offered the chance periodically to request a credit line increase by your credit card company if you're a good customer. Take that opportunity because the higher your credit line is, the more you can spend without hurting your ratio.

Of course, you'll also want to pay off everything you charge in full to avoid interest charges. But since card companies sometimes report utilization ratios before you've made your monthly payment, it's generally a good idea never to have too large of an outstanding balance at any time.

3. Having different kinds of debt

Finally, people with great credit have a good mix of debt. Types of credit account for 10% of your score and you'll do better on this factor if you have credit cards and installment loans like personal loans , a mortgage, or a car loan.

Of course you don't want to borrow money just to improve your credit, but look for opportunities to get some installment loans on your credit history if you can. For example, I don't make it a habit to have a car loan, but I've taken out loans and held them for a month or two in the past just to improve my credit score. If you're ready and in a position to buy a home, getting a mortgage can help too.

By adopting these three habits, you can make sure your own credit score is as high as possible -- and you can reap all the benefits good credit brings to you. It's well worth the effort.

Alert: highest cash back card we've seen now has 0% intro APR until nearly 2026

This credit card is not just good – it's so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy .