In the digital age, an excellent credit score matters more than ever. A company can check your credit score in mere minutes, either allowing you to qualify for a house, a new car, or other expenditure at a decent APR, or leave you disappointed and struggling with a high APR. In the worst of cases, you are denied for items you honestly need. If you are in the midst of repairing credit, this is going to take several years to achieve. If you are simply building your credit or monitoring an average to decent credit score, it's going to be a little easier to achieve that arrogant 850 number.
Is Perfection Worth It?
To some, it may be worth it, while others may just want to achieve a reasonably high score that allows them the best deals and offers. According to FICO spokesman Anthony Sprauve, any score above 760 is considered excellent. He goes on to say that lenders aren't always looking for perfection, but for many consumers, it's worth it to attain that magic number.
Monitor Your Credit Score
Whether this is something you want to do daily, weekly, or monthly, monitoring your credit score is a must. Keep in mind that while the FICO score is the most authoritative, you can easily monitor your credit with a soft inquiry through a number of outlets. Some of these sites require a nominal fee, while others, such as Credit Karma, monitor your credit for free and send you helpful alerts when you score rises or falls. Many credit card companies, such as Capital One, also offer free credit monitoring along with a standard or gold credit card. Simply create an online account with the card, and more likely than not, you can also register for a credit tracker.
Remember that certain companies only work with certain credit reporting agencies (Credit Karma works with TransUnion, for instance). According to a news article by Forbes, consumers can also get their FICO score for free via a new outlet. For an in-depth, complete monitoring of your score, you will have to use one of the paid options, but the free sites are a good starting place to keep an eye on things.
This important piece of advice goes right along with credit monitoring. More likely than not, you have errors on your credit report. This is where free sites like Credit Karma do come in handy, as they now offer an easy "dispute" button on their website. To thoroughly dispute a matter, you will need to call or contact the credit-reporting agency that is reporting the error.
Pay Your Bills on Time
While this one seems like a no-brainer, this is the number-one problem that affects credit scores, and can reflect up to 35 percent of your entire credit score. In a world where going paperless is convenient and environmentally friendly, setting up bills for auto-pay is a great idea. In addition to late bill-paying, serious financial problems such as bankruptcy, liens, charge-offs or judgments can severely affect credit for up to 10 years. If you suffer from any of these problems on your credit score, the perfect score is going to be tough - but focus on paying them off, even if you must go in installments.
Don't Max Out Your Credit Cards
Consumers mistakenly think that having credit cards that are full to capacity while making regular payments improves credit. It makes sense to think that utilizing your credit will make your score go up, but it does not. You should fundamentally be using only 1 to 10 percent of your available credit. If you have $40,000 available to you via credit, then you should only spend $400 to $4,000 of that credit line. Obviously, if you need to make a big purchase, this isn't possible, but in that case, pay off more than the minimum payment each month to get your credit line down to the optimal 1 to 10 percent zone.
Use Different Types of Credit
A person with perfect credit utilizes their credit in many different ways. This person would most likely have an auto loan, a mortgage, several credit cards, and perhaps a student loan. If a student loan isn't in your credit forecast, opt for a personal loan from a reputable lender such as Personal Lending Group. All of these accounts should be open and paid on time. This shows responsibility and longevity to credit reporting agencies. Obviously, only take out these lines of credit if they are affordable.
Try to avoid hard inquiries wherever possible. When shopping for cars, never have the dealership run your credit until you have selected a car. Places have a tendency to shoot your credit application off to multiple lenders, each making a hard inquiry that drags your credit score down for 6 months to a year. Hard inquiries are unavoidable when you need something, but space them out.
Getting that perfect credit score can be tough - but if you're patient and pay your bills on time, you can definitely get close to an 850, and perhaps attain that perfect score. Remember to keep track of your credit, and dispute any errors to keep that number up.