How Do You Get a Perfect Credit Score?
When you’re ready to start or build your credit, it’s important to understand your credit score. If you understand your credit score, you’ll be able to grow and improve it, maybe even someday achieving a perfect score.
When people discuss credit scores, they are often talking about the FICO Score. The FICO Score, created by the Fair Isaac Corporation, considers different pieces of your spending and credit usage to create a credit score for you. This score is used by lenders to assess your credit risk. FICO scores range from 300 to 850, with 850 being a perfect score. While it is difficult, if you understand what goes into a credit score and how to use your credit effectively, you can get a perfect FICO Score. To help you on your quest for perfect credit, here are the five factors that impact your credit score.
1. Paying on Time
Your payment history accounts for 35% of your FICO Credit score. This is the largest category. So, to work towards that perfect credit score, you want to make your credit card payments on time and in full each month. Remember to also make your full loan payments each month. On-time loan payments will also help increase your credit score.
2. Available Credit
This category looks at how much of your credit you use. It accounts for 30% of your FICO score. When lenders look at your available credit, they are comparing how much credit you are using to the total credit available to you. You want to keep your credit usage to 30% or less of your available credit. This means that you do not want to use more than 30% of the credit that is available to you. So, if you have a $1,000 credit limit, try to use $300 or less.
3. Length of Credit History
The longer your credit history, the higher this part of your credit score will be. The length of your credit history accounts for 15% of your FICO score. Initially, this part of your score will be low because you haven’t had credit for a long time. But over time this area will improve as you have and maintain your credit. Remember that if you have old credit cards that you’ve had for a while but don’t use any more, you should keep them open. Just tuck them away somewhere and don’t use them. Closing them will decrease your length of credit history and hurt your credit score.
4. Credit Mix
Your credit mix, or the different types of credit that you have, makes up 10% of your credit score. To improve your credit score and get to 850, you need to have a good mix of installment credit, or loans, and revolving credit, or credit cards. Do not take out loans or open credit cards just to increase your score. But take out loans that you need and can afford to pay back, and use your credit cards responsibly to help your score improve.
5. New Credit
There are times when you need to open a new credit card or take out a new loan, and that is just fine. But opening too many new accounts at one time can hurt your credit score. This is because opening several accounts at one time can indicate that you are a risky borrower. New credit accounts for 10% of your FICO score, so only open new credit when you need it.
Working Towards Your Perfect Score
When you are just starting out, it can seem daunting to try to build your score. Understanding the factors that affect your credit score can help you use them to your advantage. Make your payments on time, don’t use too much of your available credit, don’t open too many cards at once, and maintain a good mix of loans and credit cards. The longer you manage your credit well, the better your score will be. It will take time, but with dedication and good money management, you can work your way to a perfect credit score of 850!
This series on building credit is brought to you in partnership with United for Financial Health powered by Experian. Log in to your SaverLife account to earn points for reading about credit and taking quizzes to test your knowledge.
Kimbree Redburn is an Accredited Financial Counselor® with a background in economic development. She works with her clients to help them understand their financial options and make money decisions with confidence. She believes that financial education gives people a chance to build a better life.