What Is Considered an Excellent Credit Rating?

An excellent credit rating is indicated by a credit score of 750 or higher. A person with a credit score that high has a solid, consistent payment history, because he has diligently focused on the conservative use of credit rather than the abuse of it, lives within his means and does not live on credit lines. Excellent credit takes planning and an understanding of how it works.

Identification

Credit scores are determined by several components. Minneapolis-based Fair Isaac developed the system, called a FICO score, and the three credit-reporting agencies--Equifax, TransUnion and Experian--all use it, so all three of your scores should be similar.
Payment history makes up 35 percent of the score. Making payments on time or early (or paying the balance off) has a positive impact on scores.
Outstanding credit balances make up 30 percent of the score. Credit card balances should be kept at or below 30 percent of the credit line or they will begin to have a negative effect.
Credit history makes up 15 percent of the scores. A seasoned borrower with a lengthy history of payments and paying in full is strong in this area.
Types of credit have a 10 percent impact on credit scores. A mix of types of accounts carries more weight than simply having credit cards. The combination of an auto loan, a mortgage and a credit card works better.
Inquiries are a 10 percent hit, especially if is there is a lot of recent activity.
The theory is, the higher the score, the less likely a person is to default.

Excellent Business Credit

Businesses are rated by a different type of system. For example, Dun and Bradstreet, one of several rating companies, does a more comprehensive analysis of a company than is done with an individual. Company payment history is calculated in their PAYDEX system, which predicts future default potential. A perfect PAYDEX score is 70, and is similar to a FICO score of 750.
The rating system looks at the age of the company along with its assets, number of employees, net worth, payment history, legal history and cash flow to determine company's financial strength. The credit rating will be a 1, 2 or 3., with the highest rating being 1.
Even if a company has an excellent credit rating, the owner's personal credit and assets may still be needed when requesting a business loan.

Less Is More

You don't need a lot of credit to have excellent credit, and a mix of accounts is better than merely carrying several credit cards. Three or four open, active, seasoned accounts that are managed well prove to a lender that you can live within your means.

Benefits

If you have an excellent credit rating, you can earn the lowest rates are available when you take out a loan. Other companies that might check your credit rating include insurance companies, which use credit reports during the approval process, and potential employers, who use credit reports in the hiring process.

Keeping Watch

Building a strong personal or business credit rating requires planning and strategy. Credit monitoring services can help you watch and maintain your ratings. These services also offer identity theft and fraud prevention.
These services often suggest that you "opt out" from the credit bureau's solicitation lists, because preapproved offers are one of many ways your identity can be stolen (see Resources section).