Credit Cards

How To Get a Perfect Credit Score

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 7 minute read

Although achieving a perfect credit score may seem impossible, it is possible if you plan ahead and handle your money wisely. You’ve done your homework, you’ve been responsible with your finances, and you know how important a credit score is to your financial well-being. Did you also know that a “perfect” credit score may be achieved?

There are those who have achieved a perfect score, but just 1.2% of the population can claim that accomplishment, according to an Experian Report from 2019. Even if you are just beginning your financial path, there are easy steps you can do to take control and make movements to improve your credit. What you need to know about the legendary perfect credit score and how you can get there is laid out here.

About Perfect Credit Score?

Why do credit ratings exist and what does it take to have a perfect credit score?
850 is the ideal FICO credit score. The greatest possible credit score is 850, however, any number between 800 and 850 is regarded as excellent. It doesn’t matter if your credit score is 830 or 849 if you’re eligible for the greatest interest rates if your credit score is 800-plus.

Having excellent credit can also boost your job prospects, lower your insurance costs, and make it simpler to rent or purchase a home. You may not be able to earn an 850 on this exam even if you do everything correctly, but you can still achieve a respectable grade. You may still be able to qualify for a reduced interest rate or one of the finest credit cards if you improve your credit score from a bad one to a good one.

Get the best credit score possible

With a range of scores from 300 to 850, the FICO system is the most widely utilized of the credit scoring models. When applying for loans, lenders are more interested in the range of scores you fall into than the precise number. The greatest method to improve your score is to understand how it is calculated.

Have a spotless payment history.

When it comes to managing your money, paying your bills on time is an essential part of the process. This is the single most important thing you can do to boost your credit score since it prevents you from incurring late penalties on your payments. In order to have a flawless FICO score, your payment history accounts for 35 percent of your score. Late payments on your credit record might suggest that you’re a danger to the creditor, which could lower your credit score.

It takes seven years for late payments to be removed from your credit report. If you’ve missed a payment, don’t freak out. If you pay your credit card bill late, you won’t be reported to the credit agencies, but you’ll have to pay a late charge. As soon as you realize that you’ve missed a payment, do all you can to ensure that it doesn’t show up on your credit report.

Getting in touch with your credit card provider or lender if you’ve missed a payment on your credit report is a good idea. If the late charge is valid, you may be able to get it erased off your credit report if you ask for it to be.
In order to ensure that you never miss a payment, set up autopay for each of your monthly invoices.

Make sure you have a variety of credit

Your credit score may arise as a result of demonstrating to potential lenders that you can appropriately handle credit and will repay what you borrow. Credit cards, auto loans, mortgages, personal loans, and even school loans are all sorts of credit products.

About 10% of your credit score is based on your credit mix, so it’s important to plan ahead when applying for new accounts. As a general rule, most people have at least one vehicle loan, one school loan, and a few credit cards in their wallets, which is a decent mix of credit accounts for most people. For those who are still in their teens or early twenties, having student loans might help them build a credit history, which in turn affects their credit score.

Have a long credit history

Close a credit card you don’t use since it may hurt your credit score, you may have heard. It’s possible, and the reason for this is that it has a significant impact on your whole credit history. Lenders prefer borrowers with a lengthy history of good credit because it demonstrates a track record of good debt management. The average age of your accounts, which is 15% of your credit score, will be lowered if you close a card you’ve held for a long time. In order to raise your credit score, the longer your payment history is on file.

A 20-year-old credit card, for example, might slash your payment history in half if you shut it and all of your other accounts were started during the last five to 10 years. Closed credit accounts don’t appear on credit reports for 10 years, even if they were in good standing at the time of closure. For seven years, any late payments would show up on your credit report. 

It’s preferable not to terminate an account you’ve had for a long time. Instead, make periodic use of the card to keep the credit card issuer from terminating your account for lack of use.

Keep your credit limit high and your balance low

When it comes to how much money you’re using compared to how much money you’ve got accessible, this is known as your credit usage ratio. Your credit usage ratio may be calculated by multiplying your outstanding debt by the sum of your available credit.

It’s critical to remember that just your revolving credit is used to determine this percentage (i.e., your credit cards). Students, car loans, and mortgages all fall under the umbrella of “installment loans,” which affect your credit score in a unique way.

Financial experts recommend that you keep your credit usage rate below 30% of your available credit in order to get a flawless credit score. Keep it as low as possible because there’s no hard and fast rule.

To put it another way, if you have a $3,000 balance, you’re utilizing 15% of your entire available credit (3,000/20,000 = 15). The fact that you’re below the 30% mark suggests to creditors that you could be a sound financial investment. With the same $20,000 total credit limit but a $10,000 balance, you’re utilizing 50% of your available credit, which might lower your credit score. Improving your credit score may be easier if you make paying off debt a top focus.

Prioritize paying off your credit card debt and contacting your credit card issuer to request an increase in your credit limit if you are currently carrying a load.

Have a low amount of inquiries

As opposed to a soft credit check like you might have for your utilities or an apartment lease, a hard credit inquiry may potentially impact your credit score. Most lenders run a hard inquiry on one or more of your credit reports when you apply for a new line of credit.

Hard queries (also known as a hard pull) only account for 10% of your FICO score, but the other elements we’ve explored suggest that they may have a bigger influence than you believe on your score than you would expect. Before applying for a new credit card, consider strategically and long-term.

You may see your credit score drop if you apply for many credit cards within a two- to the three-month period since repeated hard draws will appear on your credit report. Depending on your other credit score criteria, each draw might reduce your score by up to five points. If your credit score is good, a strong draw is less likely to damage your credit.

The organizations that retrieve your credit record are doing so in order to assess your creditworthiness. In order to evaluate if and how much to lend you, they consult your credit record and credit score.

Within 30 days of your application, any hard inquiry connected to rate-shopping will not damage your credit score. If you completed your rate-shopping more than 30 days ago, any questions conducted during a 14- to 45-day period will be counted as one inquiry, depending on the scoring model used. There are no exceptions to this rule when it comes to credit cards.

Check your credit report on the way to an 850

A good credit score puts you at greater risk of identity theft these days (around 750 to 850). Use programs like Experian Boost or Credit Karma, which offer a version of your credit score and limited monitoring options as part of their overall service, to keep a watch on your score and any new activity on your report. If you’d like to learn more about Credit Sesame vs. Credit Karma, check out our comparison page.

Checking your credit report is a smart thing no matter where you are in your financial path. Equifax, Experian, and TransUnion, the three main credit agencies, all provide free annual credit reports. Rather than evaluating them all at once, divide them into quarterly check-ins and evaluate one at a time.

In response to the COVID-19 epidemic, the credit agencies are allowing you to obtain a free credit report once per week until April 2022, so take advantage of this service while you can.
As your credit score rises, you may find yourself checking to see if the numbers have changed after each payment, or even just to cheer yourself up on a bad day.

Make sure you don’t fixate on a small check, even if it’s thrilling. As long as you’re not quite where you want to be, don’t allow your credit score to affect your self-worth as an individual.

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