An excellent credit score usually ranks above 740, indicating that the borrower makes consistent, on-time payments. People with high credit scores usually have a total debt balance that is significantly smaller than their available credit, which is viewed as evidence of responsible debt management.
Based on industry-standard algorithms created by FICO, the major credit score companies determine an individual's risk of delinquency using a combination of factors. Payment history usually holds the highest weight, verifying that an excellent borrower makes frequent payments and doesn't have recent high-risk delinquencies, such as defaults.
Creditors also consider how much credit individuals have and how often they use it. Borrowers are more likely to have excellent credit if their total debt is less than 30 percent of their total credit limit. An extensive, positive credit history contributes to high scores, so individuals rarely rank in the top tiers until creditors have several months of borrowing activity to evaluate.
When calculating credit risk, creditors pay attention to how often a borrower applies for more credit, regardless of if the person is approved. Frequently opening new accounts gives the impression that the borrower is heavily reliant on credit and may be dealing with financial difficulties that could interfere with timely payments in the future. An excellent credit history usually shows that the borrower applied for different types of credit over an extended period of time, indicating that the person used credit only when it was necessary.