How To Get A Perfect Credit Score
Here's your no-nonsense approach to hitting that sweet 850 credit score.
So you want a perfect credit score? It's actually a lot of work, and few people have one. According to Experian's 2019 Consumer Credit Review, only 1.2% of Americans have an 850 credit score. Also, the number of Americans earning a perfect credit score has been increasing. Experian's report also states that the number of Americans with an 850 credit score increased 63% over the past 10 years. This is excellent news! It means more and more consumers are being responsible with credit.
But before we hop into all the good stuff. Let's first lay some critical background information about credit scores and what they consist of. A credit score is generally considered a number between 300-850 (300 being the lowest and 850 being the highest) seeking to assess your creditworthiness as a borrower of funds from creditors. Meaning it is a score that lets lenders and creditors know how responsible you are likely to be with the money that they lend you. Generally, the higher your credit score, the less you pay on interest because creditors have more confidence that you will pay them back. It's also important to mention many credit scores out there, but the FICO and VantageScore are the two most-used scores.
Three consumer credit bureaus help keep track of your credit scores. They are Experian, TransUnion, and Equifax. In a nutshell, they collect data on your financial moves and organize that data into credit reports that they sell to creditors and lenders. These credit reports help lenders make better lending decisions.
If we had to sum up what your long-term credit strategy should be, it would be to consistently practice good credit habits over a long time. But what does this actually mean? Let's dive into the good stuff.
Always Pay on Time
Don't ever pay late or miss a payment. Doing so causes a significant adverse effect on your credit score. A good tip is to set up auto-pay, so you don't have to worry about missing a payment. Paying on time is probably the most critical thing you can do to have excellent credit.
So, no matter what you do, don't miss a payment. Ever!
Use Credit Lightly / Have A Low Credit Utilization Ratio
This seems counterintuitive, but typically people who have higher credit scores don't use credit often. It's important to remember that credit is a tool to help you achieve your financial goals, and leveraging one specific tool to the max won't do you any good! Aim to have a credit utilization ratio under 30% and shoot for less than 10%. What the heck is a credit utilization ratio? It's nothing more than your total outstanding debt on your credit cards divided by your total available credit limit.
Limit Your Hard Inquiries
Checking your score too often can lead to a lower score. A hard inquiry occurs when a creditor formally checks your credit and is different from a soft inquiry. A soft inquiry occurs when companies like CreditKarma show you your credit score, but not in a way that will adversely affect your score. We highly recommend using CreditKarma, and because it is free!
Have a Long Credit History
Keeping accounts open is really important. If you close a statement, the average age of your credit history will decrease. Most people with high credit scores have had credit for 25 years or more.
Rarely Open A New Account
Opening new accounts let lenders think you are desperate for new credit and may signal a higher default chance. While not a huge thing to worry about, try to only open a new account if you absolutely need it.
Don't Ever Carry A Balance
This may be tough for some, but try to pay off your credit cards every month. Take a look at the interest rate for the account, and work by paying them off, starting with the highest interest rate. This will help you minimize the amount of interest you'll have to pay.
Ask for a Line of Credit Increase
Probably one of the easiest ways to boost your credit score is simply by asking for a credit increase. You'll be able to do this by logging-on to your account and clicking the "Request Credit Increase" button somewhere on your account dashboard.
Thanks So Much For Reading!
If you enjoyed reading this article and want to learn more, consider checking out Todd's YouTube video where he discusses how to get a perfect score! Let us know in the comments your thoughts and when you get a perfect score!