09/18/2014 03:36 pm ET Updated Nov 18, 2014

What Sets Top Credit Scores Apart From the Rest?

By Mike Goldstein, Content Writer at Credit Karma

The main factors that go into credit scores are well-publicized. Payment history, derogatory marks, age of credit history - if you're interested in credit health, you're probably familiar with these concepts. For all the literature out there, though, sometimes the practical differences between a top credit score and a middle-of-the-road one are less than completely obvious.

One of Credit Karma's most popular features is the Credit Report Card, which assigns each member a letter grade based on six major areas of their credit health. The grades are based on where a member's specific stats fall in comparison to our community as a whole, so the feature gives members a good idea of where they stand. For those who haven't seen their credit information put into context before, the results can be surprising. On more than one occasion, I've heard something like:

"It says I have 96% on-time payments, but it gave me a C. Isn't 96% an A?!"

The answer is...well, no. The difference between a top credit score and a fair one can be razor thin. We compared the stats* of Credit Karma members with excellent credit scores to those with fair scores** to illustrate just how small the differences can be. Read on to find out more.

On-Time Payment Percentage

On average, consumers with excellent credit scores make their payments on time 99.9 percent of the time. Credit Karma members in that top score range average just 0.13 late payments, meaning that on average, one out of every seven or eight of them has one single late payment. Consumers in the fair credit score range aren't exactly falling down on the job, either. Their percentage still tops 99 percent and they average just 1.43 late payments per person. I told you the margins were thin.

What's clear is that the competition is pretty fierce. Missing one payment may not necessarily drop your score 100 points, just like a 100 percent on-time payment record won't guarantee you an 800 credit score, but the gap between the two credit score brackets, if miniscule, is also certainly noticeable.

Total Open Accounts

Credit Karma members with excellent credit scores average 8.56 open accounts. These consumers have about 1.5 more accounts than those with fair credit scores, who come in at 7.17 open accounts.

Most credit score models factor in total account numbers, so, in general, having more accounts could lead to higher scores. Having a higher number of accounts also allows consumers to rack up on-time payments, potentially improving their credit score through that avenue as well.

In a lot of ways, having a high credit score also makes taking on additional accounts more attractive. Credit card terms like rewards rates, cash back agreements and interest rates tend to improve with better credit scores, so there is definitely more incentive for those with top scores to have more accounts.

Credit Inquiries

Compared to those with top scores, consumers with fair scores have almost two times as many hard inquiries on average. The fair subset comes in at 4.6 hard inquiries a person, compared to 2.6 for the top scores.

Having a high number of hard inquiries is certainly a cause for and a byproduct of a less-than-perfect credit score. For those in the fair range, getting approved for a desirable card can be more difficult, and each failed attempt can add a negative mark to their credit report. If you're wondering how consumers can ever escape from this cycle, carefully choosing which products to apply for is a good starting place. If you choose to only apply for credit cards that you're likely to be approved for, the path to a better credit score may become more attainable.

Average Age of Open Accounts

The difference in this category is pretty noticeable. Consumers with excellent scores have an average age of open accounts of almost 90 months, or 7.5 years. In contrast, fair credit score consumers have an average age of about 50 months, or just over 4 years.

This gap suggests that, like most things, a good credit score takes time and patience to develop. If you're new to credit, getting your score up into the top ranges might involve a bit of a waiting game. If you're already a few years in, on the other hand, you may want to consider keeping your older accounts open to keep your credit history long and detailed.

Accordingly, it's unsurprising that the top credit score group skews older. Consumers with excellent scores are 48.5 years old on average, around nine years older than those in the fair group.

Total Debt

You may find this surprising: Consumers with top credit scores typically have significantly more debt than those who rank just fair. Top credit score consumers average $101,655 in debt, compared to $77,256 for those with fair credit scores.

If this seems baffling, keep in mind that going into a large amount of debt isn't the same as being financially irresponsible. The credit scoring system is all about establishing responsibility and reliability, so some may try to prove themselves trustworthy by taking on debt and paying that money back. Consider the traditional pillar of American citizenship, home ownership. The vast majority don't just buy their homes upfront. They go into debt and pay it off over time.

Bottom Line

A whole range of different factors contribute to your credit score, and there's no magic formula to a perfect credit score. Still, there's plenty to learn from the experiences of others. Beyond simply having the patience to build a credit file complete with a high number of active accounts and a lengthy credit history, managing your credit file also requires diligence, active concern and measured caution. As you work to improve your credit health, seek out educational resources that can help you make the best decisions for your personal situation.

*Data collected in September 2014 based on the most recently available reports of 2,079,070 Credit Karma members with scores above 750 and 3,720,570 members with scores between 650 and 700.

**We've defined scores over 750 as "excellent" and scores between 650 and 700 as "fair" for the purposes of this article. What constitutes an "excellent" or "fair" credit score can vary based on the specific scoring model, economic conditions, what the score is being considered for and many other factors.

This content is for entertainment and information purposes only. The opinions expressed in this piece are those of the authors themselves, and not necessarily Credit Karma, its affiliates, or its business partners. Efforts have been made to present information that is up to date and accurate at the time of its initial publication. However, neither the author nor Credit Karma make any guarantees about the accuracy or completeness of the information provided.

About the Author: Mike Goldstein is a Content Writer at Credit Karma. Since joining the team in June 2013, he's been delivering the financial know-how on the daily.

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