You have no credit and you want to build one so you can apply for a credit line or loan. Or you may have a good score already, but you wonder, can you get a perfect or exceptional credit score? What does it take to achieve a credit score of 850? And what perks could you enjoy with that?
A perfect credit score may look far beyond your reach, but it’s not impossible to achieve. FICO Score ranges from 300 to 850, with 850 as the perfect score. However, getting a score of 800 is already exceptional.
FICO score is a scoring system created by the Fair Isaac Corporation, and today, 90% of US lenders use it for evaluating borrowers. About 20% of Americans have scores between 800 and 850 and 1.2% have 850 scores. The average score among Americans is 720, which already gives you favorable credit terms.
How to Get an 800-850 Credit Score?
If you look at a credit report of someone with a score of 800-850, here’s what you’re going to see:
- Long-standing credit history
- A mixture of different types of credit (credit card, loan, mortgage, etc.)
- Low debt utilization (30% and below)
- High credit limit
- Low credit balance
- No missed payments
- Minimal hard inquiries
So, what can you learn from these factors that make up a perfect credit score? How can you get to at least 800? Here are some tips:
1. Pay Your Bills on Time and Never Miss a Payment
Your payment history is the biggest factor that affects your credit score. It accounts for 35% of your FICO score. Of those who have an 800+ score, 95% have never missed a payment. A 30-day late payment could cut your score by 100 points.
2. Keep Your Credit Utilization Ratio Below 30%
Credit utilization accounts for 30% of your credit score. It refers to the amount used versus your credit limit. Experts recommend keeping it to no more than 30% of your credit, lest it becomes negative to creditors. So, keep your debt as low as possible.
3. Keep Your Credit Accounts for as Long as Possible
The age of your credit accounts makes up 15% of your credit score. That’s why it’s important to keep your accounts open even when you don’t plan to use them. You can ask your credit card company to waive your annual fee.
4. Have a Diverse Portfolio of Credit
A good credit mix makes up 10% of your credit score. It helps to have a credit card, student loan, mortgage loan, car loan, and so on. However, remember that you have to be responsible for paying them on time and getting one only when you need it. That brings us to the next point.
5. Avoid Applying For and Opening New Credit All At Once
Don’t apply for multiple loans or credit lines in a short period. Credit applications prompt “hard inquiries” on your credit report, which affects 10% of your credit score. Inquiries can remain on your credit report for two years.
The more inquiries you have on your report, the more you are perceived as high risk because you’re more likely to declare bankruptcy, according to FICO. Apply only when you need it so that you won’t be tempted to use credit more than you can afford to pay back.
6. Check Your Credit Report from Time to Time to Ensure Accuracy
Monitoring your credit report is important, especially as identity theft is rampant. There may also be reporting errors from your creditors, so you need to be vigilant. Ask for your free annual copy from the three national credit bureaus: Experian, TransUnion, and Equifax. They also offer a free credit monitoring tool that allows you to track your credit report regularly.
When you see errors from your report, contact the credit bureaus or your creditors to dispute and request corrections. It may take 30 to 60 days before any changes are applied.
7. Practice Good Money Habits and Mindset
Remember that credit is not free money, so having a high credit limit doesn’t mean you should spend to the maximum of that limit. It’s also important to change the common mindset that having a low credit score is the way of life. You must establish good money habits—save, invest, and spend within your means.
What Are the Perks of Having an 800+ Credit Score?
Having a good credit score can already give you good chances of getting approved on loans, but a perfect credit score opens more opportunities.
1. Higher Chances of Getting Approved on a Credit Application
When you have an 800+ credit score, you qualify for pretty much any credit line. It’s a good indicator of your creditworthiness, so creditors view you as a less risky borrower. No annual fee credit card? Check. Auto loan with zero percent intro rate? Check. Airline or hotel credit card? Check.
2. Lower Interest Rates and Favorable Credit Terms
Because having an 800+ credit score means you’re more likely to pay your debt, creditors offer you lower interest rates and favorable credit terms. Banks and credit unions can offer you as low as 2% on car loans or 3.6% on mortgages.
3. Higher Credit Limits
Some credit card companies can offer up to a $5,000 credit limit for those with a good credit score. But if you have 800+, that can go as high as $10,000. Higher credit limits can help improve your credit utilization ratio.
Some credit card companies can also offer you great rewards, such as a free vacation, high upfront bonuses, and cashback.
4. Lower Insurance Premiums
Insurance companies factor in your credit score when calculating premiums, be it for a car or a home. With a perfect credit score, you are perceived to be less risky to insure, so companies offer you lower premiums. On the other hand, bad credit means you’re more likely to make a claim, so they charge you more.
5. Easier Apartment Rental Approval
A perfect credit score suggests that landlords won’t have a headache trying to collect rent from you. As such, you’ll find it easier to get approved for an apartment rental. Otherwise, landlords may not accept you as a tenant, or they would ask you for large deposits.
How Long Does it Take to Increase Your Credit Score?
There’s no overnight fix to lower credit score, but your efforts will pay off over the long term. If you have negative items on your credit report, recovery can take time, and it varies per person. In general, paying your bills on time can boost your credit score noticeably in six months.
Here are the average times to recover:
- Missed or default payments: 18 months
- Maxing out a credit card: 3 months
- Applying for new credit: 3 months
- Closing a credit account: 3 months
- Bankruptcy: 6 years or so
Negative information on your credit report (missed payments, collections, hard inquiries) can still affect your credit approval chances for some time.
- Delinquent payments will be on your credit history for 7 years
- Inquiries will stay on your credit history for 2 years
- Bankruptcy will stay on you report for 7 to 10 years
Does Age Matter in Getting a Perfect Credit Score?
Age is not the only factor but yes, age affects your ability to get a perfect score. FICO research showed that older people tend to have higher credit scores. Remember that long-standing credit history contributes 15% to your credit score.
Does Income Affect Your Credit Score?
Income doesn’t affect your credit score in the sense that it’s not included in the computation. You can achieve a perfect credit score even with a low income. Data from Experian showed that 38% of Americans with perfect scores earn an average of $75,000 or less each year.
Although having more money could mean you can pay more, getting a score of at least 800 is not about how much you earn. It’s about paying your bills on time consistently and keeping your debt low.
What is a Good Credit Score?
A good FICO credit score is 670-739, and people with this score are less likely to have seriously delinquent credit. Below that (580-669), you’ll be considered as a subprime borrower and even lower scores (300-579) could prevent you from getting credit at all.
You don’t have to aim for a perfect score of 800 to 850 though. A score of 740-799 is considered very good and can land you with better than average rates from banks, credit unions, and insurance providers. However, if you’re able to follow the tips in this article to get an 800 or more credit score, then there are many advantages for you that make your efforts to achieve this worth it.
Getting a perfect credit score is ideal and many think it’s just impossible to achieve and maintain. But with proper money habits, you can achieve it, like the 1.2% of Americans who did and enjoy many perks. Keep in mind our tips above on how to improve your credit score and even achieve a perfect credit score. It takes time, but with patience and discipline, you’ll get there.
Do you have a perfect credit score or plan to achieve it? Share with us your thoughts in the comments below!