Excellent credit takes time, but it is possible to achieve an 800-plus credit score in your 20s
You don’t have to be over the hill to reach the top of the credit score mountain.
Generally, it takes time to build excellent credit, because in credit scoring, youth counts against you. Length of credit history, which takes into account how long your accounts have been open and how recently they’ve been used, accounts for 15 percent of your credit score under FICO’s traditional formula. If you have been using credit for only six months or a year, it’s unrealistic to expect a score in the high 700s.
Still, it is possible to establish excellent credit – a score of 800 or higher, for example – in your 20s. How? Read on. We talked to three people under 30 who have achieved credit scores of 800 or higher about how they did it.
Lyn Alden: An assist from dad
Lyn Alden, an investment strategist from Atlantic City, New Jersey, is 29 years old and has a credit score above 800. Alden’s father, who also has excellent credit, added her as an authorized user to his card account when Alden was a teenager. She also applied for what she called a “starter” credit card during college, and her score had reached 800 by the time she graduated.
“I applied for an apartment right out of school,” Alden said. “The landlord ran a credit check and confirmed that my score was over 800, and was surprised enough to point it out to me repeatedly throughout our interview.”
Nowadays, she has four credit card accounts that have credit limits ranging from $10,000-$20,000. Even though she uses the cards for almost all her purchases, Alden said her overall credit utilization rarely goes above 2 percent. Alden also has a good mix of credit – she has had multiple student loans, one of which still carries a balance.
“I still keep a small student loan around because the interest rate is so low,” Alden said. “I can pay it off anytime, but that money’s better off being invested.”
Alden also checks her credit report for errors several times per year and seldom applies for new credit.
Kelan Kline, teenage entrepreneur
Starting a business in your teens also can help you establish credit early. Digital content marketer Kelan Kline of Rochester, New York, began selling items on eBay and Amazon while he was in high school. He signed up for a business credit card to help fund his enterprise. He and his wife Brittany still use the card today to run their personal finance website, The Savvy Couple.
Brittany and Kelan Kline
Kline’s parents also co-signed for a general-purpose card that he used only to pay for the gasoline he needed to drive to and from high school. Meanwhile, Kline helped Brittany sign up for her own card when she was 18.
Both in their late 20s, the Klines keep their credit scores high by making their payments on time, keeping their credit utilization in a range of 10-15 percent and periodically asking their card issuers for credit limit increases.
“The 10-15 percent goal works pretty well for us,” Kline said. “Any time we make a big purchase, we’ll use a different card so the utilization stays low, and we pay it off right away.”
As business owners, the Klines are avid users of cards that have generous travel rewards and sign-up bonuses. However, they don’t jump at every offer that comes in the mail, and they tend to stick to issuers with which they already do business.
Kline said the couple applies for a new rewards card to get a sign-up bonus every couple of years – a good strategy for minimizing hard inquiries, which can ding your credit score by a few points.
Conrad Magalis: A credit limit leap
Getting credit cards while you’re still in high school is not a prerequisite for establishing excellent credit before you turn 30. Conrad Magalis, 29, a marketing professional who lives in the Minneapolis-St. Paul area, obtained his first credit card at 18. Since then, he’s added a few more cards that have credit limits between $7,000 and $11,000, plus student and car loans. He has never missed a payment, and he typically keeps his credit utilization at 10 percent or below.
Magalis has had excellent credit for a long time, and he achieved a credit score of 800 within the past year.
“I hit a wall of around 760-770 for many years,” he said. “This didn’t change until I realized it takes a different strategy” to achieve a score of 800-plus.
A high credit limit granted by an issuer for a new card helped Magalis pole-vault over 800.
Magalis did commit one credit-score faux pas a few years ago – he closed a credit account that was in good standing and had a relatively long history.
“I basically shot myself in the foot because that card was around for several years,” he said. “I didn’t want to have it sitting there and tempting me to use it. But if I would have kept it, I’d still have that card and its good history, even if I wasn’t using it a lot.”
A closed card account that’s in good standing stays on your credit report for 10 years, but it can also increase your credit utilization, potentially lowering your score. Fortunately, closing the card didn’t prevent Magalis from reaching his milestone of a credit score above 800.
Is it really necessary to start early?
Achieving a high credit score is typically not among the highest priorities of the average American teenager or college student. And it can be difficult even for a credit-savvy adult to understand all the details of how a credit score is calculated. Should teenagers and young adults tune out their credit scores and instead focus on things like getting into college and choosing a career?
George Washington University economics professor Annamaria Lusardi, who has written extensively about financial literacy, said it’s “critically important” for young people to understand how to build good credit. She noted that prospective landlords and employers sometimes check applicants’ credit reports.
“Good credit is not just going to give you a lower interest rate on a mortgage,” she said. “It may be important for getting a rental in a place you want. It may also be important for getting the job you want. If you have a credit score that is very low, the employer can infer that you’re having financial issues.”
Lusardi also noted that many of today’s college students are starting their financial lives in debt due to student loans. Understanding how credit scores work can help young adults manage their existing debts and prepare for other financial milestones such as home ownership later in life.
“For a young person, it has a lot of implications because you have a lot of time in front of you to benefit from a good credit score,” Lusardi said.
See related: Student credit cards: The definitive guide, How to help a 17-year-old build good credit, in 3 steps, What is a good credit score?