Most Americans in 2019 had an average credit score of 703, up from 685 in 2009. Perfectionists aim for 850. With multiple scores assigned, the FICO Score analyses data from lenders to the three national credit bureaus ranges between 300 to 850. But a perfect 850 was achieved by less than 2%. Your payment history accounts for 35% of your score, credit card utilization rate for 30%, credit history length for 15%, credit mix and new credit lines for 10% each. Other positive factors are credit dues paid on time,reduced credit utilization and timely correction of inaccurate information from lenders. Some tips for perfect credit scores:
Check Credit Reports Frequently
Check credit reports frequently, after Experian’s data breach in 2017. To ensure identity theft protection, check credit scores because if irregularity happens, it reflects on your credit score.
Fix All Errors
Credit file mistakes adversely affect credit scores as Experian, Equifax, TransUnion and specialty agencies do make errors. To guard against inaccurate information, check annual credit reports thoroughly.
Maintain Positive Financial Relationships
Money management skills mean never paying dues late. Always pay revolving and installment credit on time, without carrying balances on credit cards.
Don’t Push Credit Limits
Credit utilization accounts for 30% of your score. When lenders check credit lines and age of credit, they review credit utilized. Those maxing overall credit limits may not secure another credit line. FICO estimated that the 800 plus club-members utilize only 7% of available balances.
Keep Credit Lines Open
The age of credit accounts supports a good credit score. Credit length history is 15% of your score as lenders examine the age of accounts and frequency of account usage. Older accounts positively affect credit score, and experts advise against closing accounts not in use, as lenders report your positive relationship. If trying to close a credit card account, cut the card but leave the account open.
Remember that the 22% in the 800 plus club get lower interest rates and credit when needed. High scores get better rates,no-money-down deals and big buck savings over time. A 4% interest rate versus a 7% rate amounts to thousands of dollars saved over a 30 year term mortgage.
Understand the Debt Hierarchy
Credit card debt ensures high interest rates and it cannot acquire assets appreciating in value. Lenders assess revolving debt from a number of credit card balances to see if you are over-extended or close to maxing out cards. But be careful about being overextended with mortgages or student loans. Any debt is helpful or harmful, depending on circumstances and how debt is used.
A credit score reflects debt management. Borrower scores reflect timely payments and paying off card balances. If living beyond your means,you fail to pay off debt. Comfortable family savings allow gym memberships and streaming services to be billed to credit cards to collect card reward points.
The bottom line:
An 850 may not secure great deals but lenders discriminate positively between high FICO scores in decision-making processes, as higher score people improve or maintain scores, pay bills on time, and keep low credit card balances,applying for new credit when needed. An 800 score secures better mortgage rates than the average 704.