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How to Get a Perfect Credit Score | Getting an 850 FICO Score (Step-By-Step Method) - YouTube
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How to Get a Perfect Credit Score
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To get a perfect credit score, you must have
a high level of financial responsibility.
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This score, which on the standard FICO score
is an 850, is the highest achievable level
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of creditworthiness.
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Very few people obtain the highest credit
score, even though many have good or excellent
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credit scores in the 700-plus range.
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Even with perfect payment habits, it may not
be possible for you to obtain a perfect credit
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score due to factors beyond your control.
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However, financial professionals stress there
is no benefit to having the highest credit
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score, as long as you are in the top tier.
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Still, if you want to aim for perfection,
follow these steps.
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Part 1
Understanding Your Credit Situation
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1.
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Understand how credit agencies calculate your
credit score.
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Most agencies use payment history, types of
credit, and a ratio of debt to credit in order
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to calculate a credit score.
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If you want to get a perfect credit score,
it's important to understand the specifics
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of how your score is calculated.
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Use this information to monitor your behavior
and help you reach your goal.
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Each agency computes your credit score in
a slightly different way.
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However, the most important components measured
are your payment history (which is an assessment
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of how consistent you've been in making your
payments) and your indebtedness level (which
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measures how much credit you are using versus
how much you qualify for).
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Together, these two parts made up about two-thirds
of your credit score.
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For more on how FICO scores (the most commonly-used
credit score) are calculated, see how to understand
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your FICO credit score.
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2.
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Access your credit reports.
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Go to annualcreditreport.com to get your free
credit reports.
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This can be done for free once per year and
provides you with credit reports from the
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three major credit agencies, which are Equifax,
TransUnion, and Experian.
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Many Web sites claim to offer a free credit
report.
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These sites usually force you to join a credit
monitoring service that charges a monthly
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fee.
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AnnualCreditReport.com is the only government-authorized
site to get a free credit report.
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3.
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Check for errors on your credit reports.
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Mistakes happen and this could cost you your
perfect score.
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Get a copy of your credit report and verify
that the information pertaining to your accounts
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is correct.
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If you find an inaccuracy, make sure that
you contact both the creditor and the credit
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bureau to have it removed from your account.
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Simply fixing inaccuracies can increase your
credit score.
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Inaccuracies may be misstated personal information,
closed accounts still showing as open accounts,
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and falsely-reported payment conditions (like
late or missed payments that didn't happen).
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4.
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Know that perfect is credit is only as useful
as excellent credit.
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Most lenders have tiered lending levels that
provide different interest rates to different
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credit score ranges.
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However, there are no special packages available
for those with perfect credit, which is usually
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stated as a credit score of 850.
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In many cases, lenders extend their best offers
to borrowers with a credit score of over about
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760 or 780.
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So, at a practical level, having a perfect
credit score is no more useful than have an
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"excellent" credit score.
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Part 2
Improving Your Credit Score
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1.
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Make payments on time, every time.
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On-time payments are usually the most important
part of your credit score.
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A late payment will decrease your credit score
and will affect it for up to seven years.
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If possible, set up an automatic payment system
with your creditors, allowing them to take
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their payment out of your account every month.
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This prevents late payments.
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2.
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Keep your balances low.
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Credit bureaus look at the ratio of your available
credit limits to the amount of debt you have
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in order to determine your score.
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It's best to have a high amount of available
credit with a low debt.
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Try to use credit only for emergency expenses
and pay of the balance as quickly as possible.
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This ensures a low debt to credit ratio.
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If possible, keep your debt below 35 percent
of your total available credit.
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When your debt surpasses this limit, it begins
to reflect negatively on your score.
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3.
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Get the right mix of credit accounts.
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There are two types of accounts that may be
listed on your credit report.
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It's best to have a mixture of these two.
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If you only have one of the account types,
your score may be lower.
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Revolving accounts, such as credit cards,
have a variable monthly payment based on how
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much credit you use.
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Installment accounts, such as a mortgages
and student loans, are loans for large amounts
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of money with a fixed payment each month.
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It's best to have one or two installment accounts
and no more than four revolving accounts.
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4.
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Avoid applying for new credit too often.
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Applying for new credit accounts frequently
can have a negative impact on your credit
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score.
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This includes applying for loans, credit cards,
and other forms of credit.
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However, it does not include requesting your
credit reports on your own.
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Try to keep your new credit applications down
in the range of one to three new applications
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in a six month period.
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Part 3
Reaching Perfection
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1.
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Be consistent.
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Making it to a perfect credit requires planning
and consistency.
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You'll have to follow the recommendations
for improving your credit for decades to achieve
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truly perfect credit.
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Try to make responsible credit use a habit
that you don't even think about.
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Pay your bills on the same days every month
and track your expenditures and income carefully.
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Only by establishing a system will you be
able to keep your credit together for the
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required amount of time.
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2.
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Live within your means.
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Lenders typically look at your debt to income
ratio to determine your eligibility for a
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loan.
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In many cases, they look for debt payments
under 25 percent of your after-tax income.
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For most people, this number represents fiscal
responsibility.
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However, to have perfect credit, your percentage
spent on debt will have to much lower, around
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15 percent.
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Living more cheaply will also make paying
your bills on time and in full easier.
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3.
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Avoid flaws in your credit history.
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Having perfect credit means having a flawless
credit history on your credit report.
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If you accidentally make a late payment, but
you have a good payment history otherwise,
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consider calling your creditor to ask them
not to report the late payment.
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In many cases, they will do this as a gesture
of good faith.
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Late payments will disappear from your credit
report after seven years.
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You will not be able to get a perfect score,
or even a good one, if you have negative events
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like a bankruptcy or collections account on
your credit report.
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These flaws can stay on your credit report
for ten years, and may stay on it forever.
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4.
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Wait patiently for your score to rise.
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Time is a necessary part of the equation to
get a perfect credit score.
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You will need at least 10 years of positive
credit before you can achieve the highest
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score.
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Part of your credit score calculation actually
takes into consideration the age of your oldest
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credit account.
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For this reason, avoid switching accounts
or closing old ones.
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