You could do a lot with a perfect credit score. Namely, it would be easier to get a personal loan or line of credit when you need one. But it also comes in handy when you’re searching for a new place to live, a new job, or even new car insurance.
But is this VIP access to financial products a reality or just a dream you have? For an exclusive 1.4 percent of FICO consumers, a perfect credit score of 850 is real.
So how do they do it? Here’s how:
Good Credit Management Tips
To make a perfect score your own, you have to commit to long-term habits that keep negative entries off your report. Things like delinquencies, charge-offs, or accounts in collections will take you out of the running for however long they linger in your records.
Typically, bad entries last about seven years in your file, so achieving a perfect credit score may be a waiting game for some people.
But don’t worry — while you have a subprime score, it’s still possible to get a line of credit. Financial institutions like CreditFresh may offer a line of credit for people with bad credit in unexpected emergencies.
In the meantime, adding positive entries to your record is the goal. With time and dedication, you may be able to see these habits influence your credit history.
Check Credit Regularly
Monitoring your credit is crucial when it comes to building positive entries. By checking your report regularly, you’ll be able to see what goes into your file and how it affects your score.
Without keeping an eye on your file, you may have no way of identifying the changes that lead to a boost or drop in your score.
It also gives you a chance to catch any inaccuracies or errors that may be negatively impacting your history unfairly. Errors happen by mistake, or they could be the result of fraud. In either case, you’ll want to find out what to do to reverse these entries.
The same is true when it comes to your score. Without monitoring what goes into your file and how it affects your score, you may not know where you stand.
How often should you check your credit report?
For most people, the three free checks you get through AnnualCreditReport is enough. You may want to increase how often you check if you’re recovering from identity theft or gearing up for a big purchase.
Pay Bills on Time
When it comes to the FICO scoring model — the most popular one in use today — your payment history accounts for 35 percent of your score. While there are other factors that also impact your history, this takes the greatest piece of the pie.
This makes paying your bills on time an important habit to have.
In some cases, paying bills on time will actively add positive entries to your record. In others, it may just keep negative ones from tarnishing your financial good name.
This is because some financial institutions and utility providers may only ever report your payments to a credit bureau if you’re late. By paying bills on time — or better yet, early — you’ll avoid this problem.
Open New Accounts Wisely
Another factor determining your FICO score is length of history. Accounting for just 15 percent of your score, it may be worth less than payment history. But if you plan on achieving a perfect credit score one day, acing this element is just as important.
Remember, a perfect credit score leaves no room for mistakes. It also tends to reward people with longer histories, provided they show good habits.
Opening a new personal loan or line of credit may temporarily lower your average account age, so only ever take one out when you really need it.
Learning how to be prepared for financial emergencies goes a long way to managing this aspect of your consumer file. If you’re able to build a large emergency fund, you’ll be able to tap into these savings before needing to take out a loan or line of credit that may impact your credit history.
Keep a Low Utilization Ratio
People with a perfect credit score prove that your revolving balance matters when it comes to a line of credit or credit card. The higher the balance you carry over, the less likely you’ll earn a flawless 850.
Keeping your ratio below 30 percent is generally accepted as a good rule of thumb. But that’s for the average consumer. When it comes to achieving a perfect credit score, you have to do better than good.
Consumers with a perfect score tend to keep their utilization ratios below 10 percent — and the lower, the better. Keeping your revolving balances as low as one percent isn’t unreasonable if you expect a chance at achieving your goals.
Generally, the lower your ratio is, the better. Nevertheless, there is no ideal credit utilization ratio that will automatically improve your score. As just one element of your score, it’s weighed against the other five factors to generate your specific three-digit number.
Reducing your reliance on a line of credit or credit card is no easy feat, so here are some tips to get you started:
- Reduce existing balances to free up your available credit
- Pay bills on time to avoid carrying over a balance
- Only use a line of credit in unexpected emergencies
- Use a credit card only if you can afford to pay off your purchase in full
- Close revolving accounts only if you have to
Be Persistent
The takeaway? Never take your credit score for granted — flawless or otherwise. Your score is a dynamic number that changes as you use credit, so you may not get to keep a score of 850 forever.
Keep this in mind when making these habits your own. They need to become life-long habits for you to see the best results.
