Getting a perfect 850 FICO credit score is no easy task, but after years of good credit behavior, personal finance coach Lynnette Khalfani-Cox has achieved it in 2021.
According to FICO, only 1.6% of Americans have a perfect score. And for his Khalfani-Cox, The Money Coach and author of “Zero Debt: The Ultimate Guide to Financial Freedom,” getting a perfect score wasn’t always a tangible goal.
Previously, her score was in the high 800s. Her FICO score of 800+ is considered “exceptional” by three major credit bureaus, so she was fine with that. Even without a perfect score, borrowers with special status are eligible for loans and credit cards at the lowest possible interest rates.
But receiving an email alert about her perfect score in 2021 remains a “wow” milestone for Khalfani-Cox, who writes about her experience dealing with debt when her credit score was in the 400s. did.
Achieving the perfect score may take some time and a mix of different types of loans, but Khalfani-Cox says the following steps will help her get there. Said it was helpful.
1. Pay all bills on time
One of the easiest ways to increase your credit is to never miss a payment.
The maximum FICO credit score percentage (35%) is based on how often you pay your minimum debt on time, whether it’s a credit card, personal loan, or auto loan.
FICO data shows that late payments cannot be reported to credit bureaus until they are at least 30 days late, but failing to pay for 30 days can drop a Very Good or Exceptional score by 63 to 83 points. It may also remain on your credit report for up to seven years.
2. Avoid excessive credit checks
“Don’t apply for credit unless you really need it because you don’t want a lot of calls that unnecessarily lower your credit score,” says Khalfani-Cox. This is especially true if you plan to apply for a large loan, such as a mortgage, soon.
A referral is a request to verify your credit history, usually made with your consent as part of a loan or credit card application.
These requests are often referred to as “hard inquiries” or “hard pulls” on your credit history. Excessive requests for new credit can negatively impact your FICO score for up to a year as it can be a red flag for your credibility as a borrower.
3. Minimize debt
The amount of credit available compared to the amount you actually use is called the credit utilization rate and accounts for 30% of your credit score. The more credits you have available, the higher your credit score. Experts generally recommend keeping usage below his 10%.
“The tipping point in terms of wanting to monitor and improve my credit rating came when I started digging myself out of debt,” says Khalfani-Cox. At one point in her life she was in debt of her $100,000 which took her three years to pay off.
“After finally paying off my credit card bills, my credit score jumped by about 100 points. I’ve noticed a very strong correlation between the credit score of a person,” she says.
4. Long credit history
The length of your credit history accounts for 15% of your score. In general, the longer a loan or credit card is valid, the higher your credit score. Because of this, closing your account can temporarily lower your credit score by a few points.
This happened to Khalfani-Cox shortly after achieving a perfect credit score. She just paid off her mortgage and since then her score has dropped from 850 to 843 she has dropped 7 points.
It may not be possible for a young borrower to have a long credit history, but keeping the longest accounts open can help you start building it.
5. Mix and match credits
Combining different types of credit accounts, such as mortgages, installment loans, and revolving loans such as credit cards, to account for 10% of your credit score will improve your score. Khalfani-Cox has a variety of loans, including multiple mortgages, which have boosted her credit score.
“If you show that you can handle all these types of loans responsibly, you earn brownie points,” says Khalfani-Cox.
Of course, you shouldn’t apply for a mortgage or personal loan just to get a perfect score. However, it is a factor that needs attention when considering how to calculate your credit score.
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