Can You Get a Perfect Credit Score?
Do you aspire to join the 20 percent?
What 20 percent, you ask?
Well, the 20 percent of the US population with a perfect credit score. Yes. You can achieve perfect credit, but it takes work, planning, and self-control.
Both FICO and Vantage produce scores based upon your credit worthiness. These scores range from 300 to 850. A higher score means a better score.
Getting the Highest Scores
Celebrate because there’s no magic formula nor do you have to be wealthy to achieve an 850. You do need a job or regular income from a business of at least the US median salary of $70,000. You also have to make all of your payments on time. You should use as little of your credit as truly needed.
That probably sounds ridiculous. To earn a perfect score, you need to use little credit?
Here’s what that means. You might apply for two credit cards while your score is a 670. You obtain both. You also take out a mortgage.
You make all of your mortgage payments on time. You even make extra payments when you learn your bank does not penalize you for it.
You only charge your new lawnmower to one credit card. On the other card, you charge new bedding and table linens. You want your new house to look nice.
You make all of your monthly payments regularly. You pay about twice the minimum due each month so you incur less interest. Your credit card companies LOVE you!
The average FICO Score in America is 711 and the average VantageScore stands at 688.
After six months of these timely payments, the card companies review your account. They reward you with a higher credit limit. The credit bureaus to which they report note your six months of timely payments and your increased credit limit which you do not use. They increase your credit score by a few points. If you had started with a 500 or lower, six months of on-time payments would boost you 25 points, a year of them nets you 50 points. If you started with a decent score though, think in terms of about five points. Your 670 bumps up to 675.
You see, if you max out your credit cards, you tank your credit score and that means you lose points. You flush your previously good score right down the toilet. Yuck.
So, you do not use your new credit available. You behave as if you still had the same lower credit limit.
Regardless of how much money you make, managing your credit this way says to the credit card company and the credit bureaus that you live within your means.
Make Timely Payments
Since you only use a tiny percentage of your available credit, they want to give you more. It sounds funny, but that really is how it works. When you have a large credit limit, but you use little of it, you have loads of open credit. The bureaus look favorably upon this.
As time marches on, you build up a six-month period after a six-month period of on-time payments and restrained use of your credit limits. You keep at least 60 percent of your credit available and unused. You continue making timely mortgage payments, too. You get a raise at work. It is not huge, but it helps you because you decide to place that extra money into a savings account every month. You pick a high-yield account and that sucker grows quickly. It was a ten percent raise. Your employer knows about inflation and tries to keep up with it.
As you continued paying on-time and earning a regular paycheck, you showed the credit card companies what a stable, reliable person you are. They reported this to the credit bureaus. The bureaus responded by increasing your score by a few points every six months. Your score went to 680 at the end of the first year, then 690 the following year. You just kept on paying on-time and using little credit. 700, 710, 720, 730, etc.
The Big Jump Equity and Savings Plus Investments Makes
Eventually, you noticed it leaped up nearly 30 to 50 points. How strange you thought until you reviewed your finances with your certified public accountant or financial advisor. They showed you how much equity you had built in your home from those timely mortgage payments and the extra you put forth to pay it off a little early. They also pointed out that you had grown your net worth pretty significantly by depositing your raise in your savings every time you got one. Good job!
Although only a few years had passed, your 30-year-old self had started on the right road after paying off your student loans. At 36, you earned a 780. You just kept trucking along the way you do and before you knew it, you hit your 40s with a perfect credit score.
You still make a pretty normal salary. Other raises were not as wildly huge as the ten percent one at 30 because inflation improved. Ten years later, you earn a very decent $85,000. You amassed a pretty massive savings account though. Of course, your workplace offers individual retirement accounts. You opened that 401K when you started your job. Your employer offers matching contributions. The credit bureaus consider all of that, too.
Despite earning a normal income, your dedication to savings and investments, combined with your anal payments and the restraint with which you use your available credit earned you a perfect credit score by age of 45. If you don’t have a savings account yet, maybe you should think about that option. Check out the following options:
Fiction You Can Make Reality
While the financial lesson may be in fictional narrative form, this can become your future. You can start at any age and improve your credit score. If you use restraint while still in college and work multiple jobs to pay for tuition, you can avoid loans. If you do have to take some out, pay off what interest you can while still in school. Since loans do not become due for re-payment until you leave school, you can reduce what you owe on graduation by paying it off early.
As soon as you begin making on-time payments, you can start improving your credit. No person can do it for you. You must improve it yourself.
You can start at any time. So, how do you begin?
Use Only 40% or less of your available credit.
First, you get a job. You need regular income. You could start a business, but you need to find something that lets you earn good money from the start. It has to be legal because it has to go on your taxes. Declared income is the only income a credit bureau considers.
Second, you make all of your payments on-time. Perhaps you set up automatic payments that deduct two days prior to the payment due date. I know you read all those articles that tell you to pay the day a bill is due. You need to build in a cushion though because sometimes things go wrong with automatic payments. Two days’ worth of interest traded off for never making a late payment makes a valuable trade-off.
Third, use only 40 percent or less of your available credit. You do not need the shoes, the jersey, the golf weekend on the shore, as badly as you need the superb credit score.
Why You Care About This
Every person needs or uses credit at some point in their life. You need to qualify for as much as possible. Let’s say you only make $24,000 per year when you first graduate. Three years after graduation, you develop cancer. Your work’s medical insurance pays for much of your treatment, but not all.
Your credit and savings become vital at this point. Rather than spend all of your savings which equals about $3,600, you apply for a credit card with a low-interest rate. Despite your tiny income, your 680 score gets you a yes. Your $4,000 credit limit pays for all your treatments and you beat cancer in less than a year. It all hinged on your careful money management though and how you handled everything responsibly and with restraint. Your perfect credit score helped you save the day and led to your fabulous future.
Final Thoughts
The Goalry brand of sites can help you get started on this beautiful future. You obtain a membership with us. You use it to access all of our sites, not just Creditry. All the areas of financial management work together. You need to take an efficient, effective credit journey, while you build wealth. You need to learn to invest and you need to manage your tax shelters and file your taxes in a timely manner. This holistic approach helps you build the highest credit score possible and you can start on this journey today.