The typical FICO score is around 700, and those with scores in the 800s are often regarded as having excellent credit. However, this is very typical; it’s thought that 23% of American customers have scores of 800 or above.
However, having flawless credit is an uncommon accomplishment. The FICO scoring model’s operator, Fair Isaac Corp, estimates that just 1.4% of American consumers have flawless FICO Scores.
Because it’s challenging to identify the precise formula that would produce the coveted flawless FICO Score, there are relatively few perfect scores. Here’s what we know about flawless (and almost perfect) credit ratings and whether anyone needs a perfect FICO Score.
A Credit Score: What Is It?
According to Fitmymoney.com a credit score is “a three-digit number that represents your creditworthiness.” It typically ranges from 300 to 850 and indicates how likely you are to repay loans and make payments on time.
Your credit score is calculated using information from your credit accounts. The data collected by credit-reporting companies, sometimes referred to as credit bureaus, is used to construct credit reports.
There are several different credit scores for you, and they probably differ significantly from one another. That’s because two significant corporations calculate scores; more on that later.
The maximum credit score you may receive is 850, yet there isn’t much difference between a “perfect” score and an outstanding score regarding the prices and items you can be approved for. In other words, don’t worry about attempting to get an 850, especially because scores often change.
All Bills Should Be Paid on Time
Simply making all of your payments on time each month can improve your credit score.
Unsurprisingly, persons with a FICO Score of 850 essentially have no history of late payments, collections, or negative information. Payment history makes up 35% of a FICO Score.
According to FICO statistics, a 30-day missed payment can lower a very excellent or exceptional score by 63 to 83 points. A late payment cannot be reported to credit reporting bureaus unless it is at least 30 days overdue. Furthermore, it can remain on your credit record for as long as seven years.
Get Ahead of Due Accounts
Bringing your bills current might assist if you are behind on payments. While a missed payment might stay on your credit record for up to seven years, keeping your accounts current will help your ratings. Additionally, it prevents extra late penalties from accruing as well as the addition of new late payments to your credit report.
A debt management plan (DMP) and talking to a credit counselor are two solutions for those who are struggling with credit card debt. The counselor might be able to work with card issuers to bring your accounts current and negotiate cheaper payments and interest rates.
Improve the Credit Usage Ratio
Another important aspect of your credit score is credit use. Credit utilization is the ratio of your credit card debt to your available credit. It is computed on a global scale.
As a general guideline, try to keep your credit consumption below 30%. It impacts every card you have as well as your total credit utilization ratio. To minimize your credit use ratio, decrease the numerator (the total amount owed) and control the denominator.
To raise your credit usage ratio, use one of the following strategies:
- Paying more than the minimum each month will help you pay off your credit card debt.
- After paying off cards, keep them open. Your credit usage ratio will decline as a result of decreasing your total debt load while keeping the total credit line.
- Inquire about raising the credit limit on one or more of your cards. (Keep in mind that this might lead to a hard inquiry, which could temporarily drop your score.)
- Use a personal loan with better conditions to refinance high-interest credit cards. You can pay less interest by combining many credit card balances into a single loan with (hopefully) a lower interest rate. As a result, you’ll put more money toward the principal and finish paying off your debt sooner. Your credit usage ratio will also decrease if you keep your credit cards active after moving the sum to a personal loan.
Limit the Number of New Credit Requests You Make and the Hard Inquiries You Make of Them
There are two kinds of credit history inquiries—hard and soft inquiries—that can be made. About 2.4% of Americans who could be scored as of April 2019 have a FICO Score of 850.
Source: https://www.fico.com/blogs/perfect-credit-score-understanding-850-fico-score
A typical soft inquiry may involve your credit check, allowing a prospective employer to do so. It checks carried out by financial institutions with whom you currently do business and inquiries made by credit card firms to evaluate whether to send you pre-approved credit offers. The credit score is unaffected by soft queries.
Hard queries, however, can harm your credit score for anywhere between a few months and two years. Applications for new credit, such as those for a credit card, a mortgage, an auto loan, or any type of new credit, might result in hard inquiries. The odd tough investigation is unlikely to make much of a difference.
But having a lot of them in a short period will hurt your credit. Banks could see this as a sign that you need money because you have financial problems and are thus at greater risk. For a while, refrain from applying for new credit if you’re attempting to improve your credit score.
Conclusion
A perfect credit score is undoubtedly attainable, but even if you do, it’s unlikely that it will stay at 850 for the foreseeable future. Everyday financial actions, such as asking for new credit or paying off a debt in full, may result in drops in your score, but this does not always imply that you will have bad credit. You may often benefit from great credit if your FICO score exceeds 760.
