Top Credit Tips from the Elusive 850s

credit score

“Practice makes perfect” is rarely true in real life.

Certainly, the more you practice something, the better you get. Still, a quick YouTube search for “bloopers” will provide hours of entertaining proof that the most talented and experienced actors, athletes, and news anchors are anything but perfect. So, in reality, practice makes better, but not perfect.

But, what about that magical financial goal we should all be shooting for, the perfect credit score? Is that just a pipe dream, too? Or is it actually possible to attain perfection when it comes to your credit?

The answer is, “yes!” A perfect credit score is not only possible, it’s not even that hard to accomplish. What it takes is self-discipline, a little luck, and (for most of us) time.

The following simple, effective tips come from consumers who have managed to “practice” good credit management well enough and consistently enough to achieve the elusive 850 (the highest possible score on the popular FICO credit rating scale). Beyond bragging rights, pay attention to how this feat provides practical help, too.

Tip #1: Learn about credit and respect it

Smart consumers realize that credit is a powerful tool, meaning it can make life easier and help you get a lot of great things accomplished, but it can also be dangerous if it’s used carelessly.

Think of it like a nail gun:

With a loaded nail gun in hand, a skilled carpenter or roofer experienced with the tool can accomplish ten times the work they could get done with a standard hammer, and the chances of bending or breaking a nail are slim-to-none.

However, if someone who doesn’t know how to use it picks up a loaded nail gun, not only are they unlikely to do a very good job completing the work, but everyone on the construction site had better duck.

If you’re shooting for a perfect credit score, you need to learn all you can about how credit works, then concentrate on applying what you’ve learned in making your daily decisions.

Tip #2: Don’t shoot yourself in the foot

Carrying the nail gun analogy one step further, when the inexperienced worker picks up that tool, who’s most likely to get hurt? Yes, the person holding the nail gun.

Once you’ve taken the time to learn how credit works, what affects your credit score negatively, and how you can repair your credit, you need to avoid “shooting yourself in the foot” by making silly mistakes like spending uncontrollably, missing payments, or over-extending yourself unnecessarily.

Just one late payment can hit your credit score hard, (since payment history makes up about 35 percent of your total score calculation) and a negative factor like that can remain on your report for up to seven years.

Tip #3: Mix it up

Lenders like to see that you’re able to responsibly handle various types of credit. This is so important, in fact, that it makes up about 10 percent of your credit score.

There are two basic types of credit: installment and revolving. Installment credit includes things like a mortgage or car loan, in which you borrow a lump sum and are required to pay back a set amount each month for a set period of time in order to pay the loan off. Revolving credit includes most credit cards and lines of credit, in which you are allowed a maximum credit limit, but can borrow any amount under that figure at any time, paying the debt off as you go.

These credit types are further separated into secured and unsecured credit, with unsecured credit relying more on your proven trustworthiness as a borrower.

Consumers with the highest credit scores maintain a healthy mix of these different types of credit and manage all of them equally well.

Tip #4: Play the long game

About 15 percent of your overall credit score is based on the average length of your credit history. The longer your history, the higher your score, since it gives lenders more information on which to base their decisions.

The average length of credit history among consumers with perfect credit scores is about 30 years. To accomplish this, they rarely close any accounts, even if they’ve destroyed the card and never access the account for any reason.

Tip #5: ‘Thanks’ to rising credit limits, ‘no, thanks’ to using more credit

Another important consideration is your credit utilization (worth 30 percent of your score,) which is the total amount of available credit that’s been extended to you compared to the amount you’ve actually used. If you already have a significant amount of available credit, but you’re only using a small portion of it, lenders see this as an excellent sign of your ability to manage credit responsibly. As a result, they’re more likely to offer you more.

Those with perfect credit scores average a utilization ratio of just seven percent. So, for instance, for every $10,000 they’ve been offered in various forms of credit, they’re maintaining a balance of just $700 month to month.

The easiest way to accomplish this — beyond using credit sparingly — is to keep revolving credit accounts open with little or no balance (as noted in Tip #4.) Then, when the credit card company inevitably offers you an increased credit limit, accept it graciously. Just don’t take that as permission to start spending more. By upping your limit, they’re automatically boosting your utilization ratio (as long as you don’t spend more to match.)

Tip #6: Take the application process slowly

The last 10 percent of your credit score is based on how often you apply for credit, or how recently you’ve done so.

The algorithms make allowance for “shopping around,” such as when you’re visiting several different car dealerships to find the best deal on your next purchase. They do so by counting several inquiries for the same type of credit within a few days as just one inquiry.

However, if you’re applying for something new every month or two, it’s going to hurt your score. To lenders, this looks like the behavior of a desperate individual who’s struggling to catch up from some financial downturn, so it makes you appear less trustworthy as a borrower.

That’s why it’s best to rely on credit limit increases (as noted in Tip #5) rather than applying for new credit if you’re hoping to boost your utilization ratio. Likewise, using older, active accounts with no balance in them (as recommended in Tip #4) offers a preferable safety net to applying for new credit if you need access to more funds.

Bonus Tip: Keep an eye on your score and fix errors on your report

If you followed all the other tips above and handled your credit masterfully, you could still end up with less than a perfect score. How?

You could be one of the millions of Americans with errors on their credit reports that are dragging their score down. That’s why consumers with the highest credit scores stay on top of their credit reports through regular monitoring, and routinely dispute inaccuracies with the credit bureaus.

If you’d like to access your credit report for free and learn more about the credit repair process for fixing errors on your report, contact today. Your perfect credit score could be just around the corner.


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