3 Secrets Shared by Everyone with Perfect Credit Scores

As of mid-2023, only 1.54% of Americans achieved a flawless FICO® Score of 850, reported Experian. This select group enjoys benefits such as premium reward card offers and the most favorable mortgage interest rates. Moreover, attaining this ideal credit score indicates strong financial health.

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What does it require to become part of the 850 club?

The following are three significant factors shared by Americans who boast flawless credit scores.

1. They have minimal outstanding amounts on their credit cards.

Some people think you have To maintain a credit card balance in order to enhance your credit score. In reality, the lower your credit card balances, the better -- and $0 is best .

The smaller the amount you owe on your credit cards, the lower your debt load. credit utilization ratio Your credit utilization ratio is calculated as the total amount of revolving debt (specifically, credit card balances) divided by your available credit limit. Keeping this ratio low is ideal for maintaining a good credit score.

If you have a total debt of $5,000 spread across three cards with an aggregate spending limit of $20,000, your credit utilization ratio would be calculated as $5,000 divided by $20,000. 25% .

Americans with perfect FICO® Scores have an average credit utilization ratio of 4% , according to Experian.

Ways to reduce your credit utilization ratio

The simplest method to attain a low credit utilization ratio is by paying down your credit card balances.

But you still need to use your credit cards If you aim to boost your credit score, you should consider paying them off as quickly as possible.

Your credit utilization ratio is determined monthly, typically towards the conclusion of each billing cycle. Therefore, should you carry a significant balance upon receiving your statement, this ratio tends to spike higher. even if you settle your entire balance before the deadline .

If you settle your credit card balance every couple of days, or immediately following large purchases, you can keep your credit utilization rate quite minimal.

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2. They consistently make timely payments for their bills.

Many individuals have one or two late payments recorded on their credit reports. However, the typical American boasting a flawless credit score often does not. zero missed payments.

Your payment history is the biggest factor in your credit score. Paying your bills on time will go a long way toward helping you build excellent or even perfect credit. However, even one missed payment could tank your credit score.

Keep in mind that regarding your credit score, "late" doesn’t refer to being just one day past the payment deadline. Typically, overdue accounts only get reported to the credit bureaus after they have been missed for some time. 30 days following the payment deadline .

Nevertheless, even a single day of delay can result in additional costs since many lenders impose late fees.

3. Their credit records span many years.

Your "credit history duration" is the third most significant element affecting your credit score. This encompasses:

• The age of your most senior account
• The date when your most recent account was created
• The typical age of all your accounts
• For how long particular accounts have been active?

The more you make timely payments over time, the better your score becomes. Below are a few methods to boost this aspect of your credit score:

• Maintain your credit card accounts for as long as you can. If you decide not to use your credit card anymore, you should still make occasional purchases with it every few months to keep the account open and active.
• Avoid opening extra credit cards unless necessary. If you keep applying for a new card each year, your typical account age will not significantly increase with time.

Aim for the stars. If you fall short, you might end up in the upper 700s.

Nobody needs a perfect credit score. If your credit score is about 760 or higher, then it's considered "excellent," and you can get the best credit cards , affordable loan interest rates, reduced insurance premiums, and additional benefits.

In spite of this, there's absolutely no reason not To strive for an impeccable credit score. Ultimately, achieving this involves discipline and maintaining a debt-free status. Furthermore, should your credit score surpass 800, it might still face significant damage if not carefully managed. still Aim for the "excellent" category. However, try not to worry excessively about attaining flawlessness. Scoring slightly above 700 won’t gain you significant additional benefits beyond boasting privileges.

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