How Do I Get an 850 Credit Score?
It’s every financially responsible American’s dream: the rare and elusive “850” — the perfect credit score and a golden ticket to low-interest loans and premium credit cards. It can be yours, but it isn’t easy, and, frankly, it might not matter. On the FICO scale of 300 to 850, the dividing line between “good” and “very good” is closer to 760. If you have achieved that score, you probably aren’t missing much.
For those who will settle for nothing less than perfection, however, here’s how it’s done.
1. Understand the Formula.
Your credit score is calculated based on five weighted factors, most notably your payment history and the amount of money you owe as a percentage of your available credit. Missed payments, charge-offs and evictions will remain on your report and affect your score for about seven years; bankruptcies for 10 years or longer.
Other factors include the average age of your credit accounts (the older the better) and whether you are actively seeking new credit, which will show up as hard inquiries and can affect your score, particularly if they happen in groups.
Finally, remember that each of the three major credit bureaus, Equifax, Experian and TransUnion, maintains its own report, and the information each contains — and the score it generates — can vary. Before you can truly know where you stand, you have to review all three and correct any errors.
2. Do Everything Right for a Long Time.
In the absence of any of the negative factors described above, a perfect credit score is possible. But once you’ve achieved good credit, you have to fight to maintain and build it. Here are four indispensable steps:
- Don’t miss a single payment. Your journey toward 850 can be derailed by a missed payment. If you use one or more credit cards or are paying off a loan, eliminate the possibility of human error. Ask your credit card providers to automatically deduct your full balance from your checking account at the end of each billing cycle, for example, and use online banking to set up automatic payments for installment loans.
- Don’t borrow too much or too often. Good credit creates good credit opportunities, but borrowing too much or seeking credit from multiple sources in a short timeframe can and will throw off your score. The same goes for running up card balances, particularly to more than 30% of your total available credit.
A persistent myth says inactivity on your credit cards can hurt your score. That’s not exactly true. Maintaining zero balances is a good thing. But a provider can cancel a credit card without warning for inactivity, and losing a card you’ve had for a long time can lower the average age of your accounts.
- Don’t borrow to pay for depreciating assets. Avoid using credit to buy what you couldn’t otherwise afford. Student loans for bankable degrees and mortgages for affordable homes are wise investments. Overextending on a new vehicle, putting vacations on credit cards and buying expensive clothes and electronics with department store cards are not. If you spend more than you earn, it will catch up to you eventually.
- Monitor your credit. You have to keep an eye on your credit to detect identity theft, errors and inaccuracies. Consider signing up for a credit-monitoring service that allows you to log on and check your credit as often as you like, or visit AnnualCreditReport.com to order a free (by government mandate) report from each of the three bureaus once a year. You can also cycle through the bureaus by ordering your free reports in a four-month rotation.
3. Accept That It Might Not Work Out.
Following all the steps listed above makes a perfect credit score possible, but it’s not guaranteed. And if you do reach the 850-point mark, it’s not necessarily permanent. The most recent estimate from Fair Isaac Corp., home of the FICO score, said that only about 0.5% of all consumers have a perfect score.
There is also the matter of FICO’s chief rival, VantageScore, which is in use by about 10% of creditors. Created by a partnership among the three main credit bureaus, VantageScore is designed to be more predictive of credit behavior and more inclusive of consumers with thin histories. The latest iteration of VantageScore uses the same scale as FICO, so it’s possible to have an 850 with one model and a lesser score with the other.
But for the less-than-1% who make it to 850, one way or the other, it’s a great feeling. If that’s your goal, good luck!
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