How to Get a Perfect Credit Score
The easiest way to secure a great rate on a loan is to have a great credit score. So it only makes sense that the only way to get the best possible rate is to have the best possible credit score. But is it even possible to have a perfect credit score? Let’s take a look at what you would need to do to achieve a perfect credit score.
Your Credit Utilization is Around 9%.
One of the factors that weighs into your credit score is your credit utilization. Generally, this is calculated by the amount of credit you are using against the amount of credit you are eligible to use. For example, say your credit card has a limit of $5,000 dollars, and you have a balance of $1,000 owed at the end of your billing period, then you have a credit utilization of 20%. The objective here is to try to keep the amount owing on your card at around 9%. This doesn’t mean that you can’t spend more on your credit card, but if you do make a big purchase, try and pay it off before your bill is due, that way it won’t count against your credit utilization score. You also want to make sure you keep using your credit card regularly, since banks want to see that you know how to handle money properly, and keeping a small but healthy amount of credit in action is the best way to prove that.
Your Payment History is 100%
This one doesn’t budge. There is almost no way to achieve a perfect credit score of 850 without having a 100% history of paying off your credit and loans on time. It’s important to note that the more varied your borrowing portfolio is, the easier it is to maintain a high score in this category. If you only have one credit card, for instance, and you missed even one payment on that card, it will significantly impact your payment history score. But if you have two credit cards, a mortgage and a businesses loan, then missing one credit card payment one time will be a much smaller drop in the pond.
You have no Derogatory Marks
A derogatory mark is a big hole in your credit score. These are usually pinned to you if you have failed to pay back a loan, paid it back late, or have declared bankruptcy. These typically stay on your credit report for up to ten years, however, there are ways to remove them if you can negotiate with the lender you weren’t able to repay and restructure your loan. It’s imperative you have no Derogatory Marks if you want a perfect credit score.
You need to have at least 21 loans or accounts of credit.
This one is a little more intense, and also begs the question, is it even worth it having a perfect credit score? Is a very very good credit score not enough? In order to qualify for a perfect 850, you need to have at least 21 loans or open lines of credit that are in good standing, with low utilization.
You have to have made no credit inquiries in the past 2 years.
Credit inquiries, specifically hard inquiries, which are inquiries made when you are applying for a loan or credit card, count against your credit score. This might seem counter-intuitive, since you need to apply for loans and lines of credit in order to build credit in the first place. The workaround for this category is that credit inquiries are removed from your credit score after two years. Essentially this category is created for lenders so they can see how often you’ve applied for loans recently, which helps them understand the risk involved in lending to you and adjusting their APR accordingly. The thinking is that even if you have a good credit score, if you just recently went on a borrowing rampage it makes you a less stable and consistent borrower.
Is it actually worth it to have a perfect 850 credit score though?
In general, lenders will start offering their best interest rates to borrowers with scores of around 750, which is significantly lower than our perfect score. Surely, not every single person with a 750 credit score will be able to secure the best rates all the time, but if you can generally find yourself getting a great rate with a score 100 lower than perfect, it might not be something worth pulling your hair out about. Arguably the real concern with a credit score is making sure you don’t have a bad one, as interest rates and APRs tend to go up exponentially with bad credit loans. Ultimately, if you already have good credit, it’s up to you what you want to do.