When you get together with your friends, family, and coworkers, there’s always one person who loves to brag about how well they’re doing. It may be about their new car, high-paying job, or even the amazingly low interest rate they just got on their mortgage.
So wouldn’t it be great if the next time they opened their mouth to be braggadocious, you could one-up them by reporting that you had a perfect credit score? There’s no topping that!
But there are plenty of financial benefits to a perfect (or excellent) credit score, too.
FICO, the most popular credit scoring model, issued by the Fair Isaac Corporation, ranges from 300 all the way up to 850. Generally, a score above 680 or so is considered “good,” and once you hit the 720 to 740 range, your score is considered “excellent.”
But there’s another level or two above that for consumers to strive for. In fact, 32.8 million people have FICO scores between 700 and 749, but approximately 70 million consumers have FICOs above 760.
Don’t stop there, because it’s possible to raise your credit score even higher. An estimated 36.4 million people have scores between 750 and 799, and 38.6 million are in the 800+ FICO range.
Only about 1% of consumers, around 2 million people, ever reach high-end 800-850 scores.
In fact, FICO estimates that only about .5% (half of one percent) of all consumers with a credit score have a perfect 850 FICO. To put in in context, the average FICO score in the United States has just reached 700 for the first time.
Remember that FICO isn’t the only credit scoring model, as there are dozens of other scoring models that banks and lenders use to make lending decisions, and then different versions of each depending on what kind of loan or even consumer they’re vetting.
So let’s say you reach an 800 credit score, or even an enviable 850 – a perfect credit score. Beyond bragging to your friends, what are the benefits?
An 850 credit score may not help as much as you think IF you compare that to another great score, like an 800, 780, or even lower. That’s because FICO uses algorithms that rate scores within “brackets,” which means that if you have above 750 or maybe 780, there really won’t be an additional benefit the higher you go.
“It’s important to understand,” reports FICO spokesman Anthony Sprauve, “that if you have a FICO score above 760, you’re going to be getting the best rates and opportunities.”
For instance, a consumer with an 850 FICO will most likely be offered the same mortgage interest rate, auto loan rate, or 0% interest credit card offer as another consumer that “only” has a 780 score.
While you may expect little perks, additional beneficial terms, and premium services with a perfect credit score, you most likely won’t see any huge benefit once you reach the “super-prime” scoring bracket.
So why strive for a perfect score? Remember that credit scores are dynamic, constantly going up and down, so today’s perfect score may be a little less next month. Furthermore, it certainly doesn’t hurt to aim for a perfect score and still have an excellent FICO even if you fall a little short. And since your credit score is a good indicator of your financial acumen and dealings with debt, a perfect credit score most likely means that your financial house is well in order.
Whether you want a perfect credit score – or just trying to improve your score until you reach 700 or even 800 – here are ten important strategies:
- Pay on time (and never miss a payment)
Even one late payment can hurt your score, and paying on time is about 35% of how FICO calculates your score. In fact, 96% of people with a FICO score of 785 or greater have no late payments on their credit reports.
- Pay down your balances
Your credit utilization ratio – how much debt you keep compared to total available balances – makes up about 30% of your credit score calculation. While you commonly hear that you should pay your credit cards and debt down below 30% of the available balances, to shoot for that perfect credit score, you’ll want to pay then down to 10% or below. In fact, a survey of consumers with 800+ scores revealed that their average credit utilization rate was just 7%.)
- Keep older and seasoned accounts
About 15% of your credit score is calculated by the length of your accounts, so older is better. According to FICO research, the average credit super scorer has an account that’s 19 years old. Likewise, the average age of their accounts is between 6 and 12 years, and they opened their most recent account 27 months ago or more.
- Keep a good mix of credit
10% of your credit score depends on managing a healthy mix of credit, including mortgages, installment loans, and high-quality revolving accounts. Consumers with FICO scores 760 and up have an average of six accounts that are currently “paid as agreed,” and an average of three accounts with a balance.
- Shop around in clusters
When you have your credit pulled to “shop around” for a loan, make sure it’s within a 30-day window and FICO won’t factor those pulls into your score. Even if they are spread out within 45 days, they’ll only be treated as one credit inquiry.
- Check your credit report often
About 25% of all credit reports contain errors, and ID theft and fraud affect about 1 in 8 American consumers. So to achieve a great score, check your score frequently and consider a credit monitoring service.
- Make payments before the due date
To earn an 800+ credit score, make payments well before you receive your bill and the due date. Try paying off (or down) your purchases at the end of every week for the best credit score.
- Increase your credit limit when offered
Another way to improve your credit utilization rate and boost your score is to take advantage of any offers to increase your credit line.
- Stick to one or two good credit cards
It’s best if you only use one or two cards on a regular basis. American Express is a great choice, as the balances don’t report to FICO since you pay them off in full every month.
- Improve your score with Nationwide Credit Clearing!
We’re the trusted leader in credit repair done right. Contact us at (773) 862-7700 or MyNationWideCredit.com for a free report and consultation so we can get you started on the way to a perfect credit score!