Imagine a financial world where every dollar you borrow comes at the lowest possible cost, every credit card you open offers elite perks, and your mortgage rate is the envy among your friends with home ownership aspirations. 

Those are just a few perks of an excellent credit score.

Your credit score isn’t just a number or bragging rights but a multiplier of financial freedom and security. It doesn’t just impact your financial life; it impacts everything from where you live to even the job offers you receive.

It’s a silent partner in almost every significant financial transaction, and the stakes are even higher for high earners. 

What’s a Credit Score, Anyway?

Imagine your financial reputation distilled into three digits. 

Sure, it’s an unforgiving, albeit controversial, metric, but it’s a key component of how many financial institutions view an individual's " loanability.” 

A credit score typically ranges from 300 to 850, with the magic number for high earners being closer to 800 or above. This snapshot of your credit health reflects your history with borrowing and repayment, which is often a strong indicator of future performance. 

A strong score eases approval and ensures you get the most favorable rates. The difference between, let’s say, a 780 credit score and a 520 credit score could result in hundreds of extra dollars in monthly mortgage payments. 

A credit score comprises several factors: debt utilization, credit age, credit mix, and any new credit. 

1. Your payment history and how reliably you’ve paid past debts. 
2. Debt utilization and how much of your available credit you're using.
3. Credit age and the length of your credit history.
4. Your credit mix and the variety of credit accounts you hold (think mortgages, credit cards, auto loans.)
5. New credit and how many new accounts you've recently opened.

We’ll go into this in greater detail in the next section.

The big three credit bureaus—Equifax, Experian, and TransUnion—aggregate these components to give lenders a clear picture of your creditworthiness. 

Each bureau might calculate your score slightly differently, so monitoring all three is critical for high-stakes financial moves.

Generally, here are the ranges of how credit scores are categorized: 

• Excellent: 800–850
• Very Good: 740–799
• Good: 670–739
• Fair: 580–669
• Poor: 300–579

So, what gives these companies the right and privilege to keep track of your records?

Longevity and connections, mainly. These companies have been in the business for decades, some for over a century. Equifax, for example, was founded in 1899. Over time, they've built extensive databases and relationships with financial institutions, which new entrants would find difficult to replicate.

These companies operate under the authority of the Fair Credit Reporting Act (FCRA), established in 1970, to ensure the accuracy, fairness, and privacy of the information contained in consumer credit bureau files. 

The FCRA gives them the right to collect and share your credit information with lenders, insurers, employers, and others who have a legitimate reason to review your credit history. 

However, this also means they are held to strict regulations regarding how they manage and protect your data. They’re allowed to collect your name, Social Security number, address, and employment history; details about your credit cards, loans, and payment history; information from legal records like bankruptcies or tax liens; and even records of when lenders or others have checked your credit.

So, in addition to lenders relying on credit reports to assess a borrower's risk, sometimes employers review credit reports as part of the hiring process, particularly for roles that involve financial responsibility.

Your rights under the FCRA include a free report from each bureau every 12 months to monitor your credit and the right to dispute errors on your report (the credit bureau is responsible for investigating and correcting inaccuracies). Further, only authorized parties, like lenders or employers with your permission, can access your credit report.

There’s also a time limitation factor: most negative information, such as late payments, must be removed from your credit report after seven years, though some types of bankruptcy can remain for up to ten years.

How a Credit Score is Calculated

There are several ways to calculate a credit score, each with strengths and weaknesses. 

The main scoring systems generally operate within a range of 300 to 850, and FICO is one of the most widely recognized scoring models.

Generally, credit scores above 750 are considered the upper echelon of brackets, unlocking stellar credit card rewards, loan terms, and smooth sailing when employers or landlords review your credit. 800+ is comfortably in the top tier, with all the associated perks of being at the peak of financial reliability.

As noted above, your FICO score is made up of several key factors.

Payment history is the most critical, accounting for 35% of your score. It reflects how reliably you’ve paid your bills over time. 

Making payments on time is a green light for lenders. 

While the system is somewhat forgiving—most companies have grace periods before reporting late payments—it’s still wise to avoid pushing deadlines.

To nail this part, get your bills on autopay or set aside a specific monthly time to review and settle your accounts. 

The next major component is credit utilization, which makes up 30% of your score. 

Lenders prefer to see that you’re not using a large portion of your available credit, as it suggests you’re managing your finances well. 

You should use less than 10% of your credit limit. 

For example, if you have two credit cards with a combined limit of $10,000, keeping your balance under $1,000 will help maintain a favorable utilization ratio.

This can be achieved by either spending less or increasing your credit limits. 

Spreading your spending across multiple cards helps keep individual utilization rates low.

The length of your credit history contributes 15% to your score; lenders favor borrowers with a long, established credit history because it proves their ability to manage credit over time. For example, someone who has had credit cards for over a decade, with a spotless payment record, is considered less risky than someone who opened their first account only a few months ago. 

To win points in this regard, it's generally better to keep old accounts open, even if you don’t use them frequently, as they serve as anchors that lengthen your overall credit history.

Credit mix, accounting for 10% of your score, refers to the variety of credit accounts you hold. 

Lenders like to see that you can handle different types of debt, such as revolving credit (credit cards) and installment loans (like mortgages or car loans). 

A diverse credit portfolio can enhance your credit score by demonstrating your ability to responsibly manage multiple forms of credit. 

However, not having a mix of credit types can sometimes lead to limitations, as would be the case with someone denied an auto loan despite having a high credit score because their credit history consisted solely of credit card debt.

Finally, the remaining 10% of your score is influenced by new credit. 

Opening several new accounts quickly can signal lenders that you might be in financial trouble, leading them to view you as a higher risk. 

It’s important to be conservative with credit applications; space them out and only apply for new credit when necessary to avoid negatively impacting your score.

Raising Your Score Tip #1

Understanding what's on your credit report is the foundation of improving your credit score. 

The three major credit reporting agencies—Experian, Equifax, and TransUnion—keep detailed records of your credit history. 

Thanks to the Fair and Accurate Credit Transactions Act (FACTA), U.S. residents are entitled to a free credit report from each bureau once every 12 months through AnnualCreditReport.com. This site is the only source authorized by the Act to provide these free reports, allowing you to check your payment history and identify any errors.

If you’re planning a major purchase or addressing significant credit issues, it’s wise to check all three reports simultaneously. However, if you’re in maintenance mode, spreading your checks out over the year (one every four months) ensures you stay updated on any changes.

There are free alternatives for your actual credit score. Discover Financial offers free FICO score access, as does Credit Sesame. Both platforms also give personalized tips to improve your credit score.

Raising Your Score Tip #2 

Your credit utilization ratio—the percentage of your credit limit that you’re using—is a crucial factor, accounting for about 30% of your credit score. 

As noted above, try to keep this ratio below 10%.

Start by paying off any existing credit card balances. Not only do they negatively impact your credit score, they accrue costly interest. If you have multiple cards with varying balances, prioritize paying down the ones with the highest utilization first.

Additionally, remember when your card issuers report to the credit bureaus. Even if you pay your balance in full each month, a high utilization rate on your statement could hurt your score. 

To avoid this, consider paying your balance multiple times a month or immediately after a large purchase.

If your credit score is already decent, consider asking for a credit limit increase or opening a new credit card to spread out your spending. 

Raising Your Score Tip #3 

A diverse credit mix—including revolving credit (like credit cards) and installment loans (like auto loans or mortgages)—makes up about 10% of your credit score. 

While you shouldn’t take on unnecessary debt, strategically managing different types of credit can improve your score.

For example, consider taking out a small personal loan to pay off higher-interest debt if you only have credit card debt. 

Or, if you already have student loans, financing a small portion of a new car purchase can diversify your credit without adding significant financial strain. This diversity demonstrates to lenders that you can responsibly manage various types of debt, and possibly help lift your score.

Make Sense of Raising Your Credit Score

Does a perfect 850 score mean you can walk into a bank and come out with a multimillion-dollar loan just on your name? 

Probably not. 

Though achieving a perfect score may take over a decade of responsible management, it’s not a golden ticket to astronomically favorable terms.  

However, it gives you an edge over folks with lower credit scores, even if they have more liquid assets or annual income. This can make all the difference when making significant, competitive purchases like buying a new house. 

Remember, checking your credit score is free and takes less than five minutes, so keep an eye on your credit score periodically. 

Additional resources include MyFICO (great for calculators showing how credit scores can affect mortgage rates and car loans), the Consumer Financial Protection Bureau (CFPB) for general information, and Bankrate for real-time interest rate comparisons.

(Source: https://www.myfico.com/credit-education/calculators/loan-savings-calculator/)

 

If you’re serious about boosting your credit score quickly, partnering with a financial planner with experience working with high earners can be the game-changer you need to see real results.

 

 

Sources:

https://www.consumerfinance.gov/

https://www.consumerfinance.gov/ask-cfpb/what-is-a-credit-score-en-315/

https://www.investopedia.com/terms/c/credit_score.asp

https://www.hellohenrys.com/home/2018/11/26/6-steps-you-can-take-today-to-improve-your-credit-score

https://www.reddit.com/r/Adulting/comments/1598eiw/real_ways_to_raise_your_credit_score/

https://www.myfico.com/credit-education/calculators/loan-savings-calculator/

https://www.discover.com/credit-cards/free-credit-score/

https://www.creditsesame.com/

https://www.lynalden.com/how-to-improve-your-credit-score/