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His Balance Is Very Low
Though Droske points out that his balance naturally fluctuates month-to-month, on this credit report it was a total of $638. This is very low when compared to Americans’average credit card balance of $6,194.
Typically, Droske says he will charge any utilities that allow payments with a credit card, such as his gas, electric, phone, garbage and alarm system bills. “Plus any spending for food, home items, groceries…pretty much anything that can be charged that doesn’t require cash,” he says. “But I don’t try to charge any big-ticket stuff like car, mortgage or tuition payments. Bigger stuff like that is often either not allowed to be charged or there is a premium to use a credit card so I don’t bother with those.”
But no matter what Droske charges on his credit cards each month, the key is that he doesn’t spend more than he normally would just because he has the flexibility of paying with credit.
“That is the problem for many people, they charge more because it’s easy and they can,” Droske says. “My spending habits didn’t change just the way I pay for things.”
Diversify Your Credit Lines
When working on improving your financial standing, many consumers believe that you need to open multiple credit cards at strategic points throughout the years. Unfortunately, that doesnt do much to help you diversify your credit lines, which is what really matters when trying to attain improve your credit rating.;
Diversifying your credit requires you to consider opening various financing accounts, including:
- Student loans
- Auto loans
- Personal loans, etc.;
Maintaining multiple lines of credit proves to lenders that you can manage and can pay back different types of loans on time. Diversifying your credit mix can help you reach excellent credit score status.
Just remember, there will be a hard inquiry with every new loan you apply for so be careful not to open to many accounts at the same time.;
What Is A Good Credit Score
For a score with a range between 300 and 850, a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent. Most consumers have credit scores that fall between 600 and 750. In 2020, the average FICO® Score in the U.S. reached 710an increase of seven points from the previous year. Higher scores can make creditors more confident that you will repay your future debts as agreed. But creditors may also set their own definitions for what they consider to be good or bad credit scores when evaluating consumers for loans and credit cards.
In part, this depends on the types of borrowers they want to attract. Creditors may also take into account how current events could impact consumers’ credit scores, and adjust their requirements accordingly. Some lenders create their own custom credit scoring programs, but the two most commonly used credit scoring models are the ones developed by FICO® and VantageScore®.
Check Your Credit Reports Frequently
Singletary and Bird check their credit reports often. Following Experians data breach in 2017, Bird signed up for credit monitoring. She checks the alerts she receives for transactions against her credit to make sure there arent cases of identity theft or inaccuracies.
As a matter of identity theft protection, I regularly check my credit score because if theres something funky happening it can show up on your credit score, said Singletary.
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Mix Up Your Credit Accounts
You need 21 or more lines of credit to get an excellent credit score. The easiest way to get a high number of lines of credit is to open a bunch of credit cards. Like I said before, you dont want to be opening up new credit cards later on in your perfect square Journey.
21 or more accounts is a lot. Makes me cringe to imagine having 21 different credit cards floating around. So if you have a mortgage, car payment, and line of credit, that already count is 3. Only 18 more to go. Sounds ridiculous I know If you really want that 850 credit score, then you better get going!
Having A High Credit Score Could Give You Access To More Favorable Loans Credit Cards And More
Good credit. You mayâve heard the term more times than you can count. Thereâs a reason for that.;
Itâs because credit can touch many parts of your life. For example, it may impact where you live, how much money you can borrow and how certain employers may view your job application. Read on to take a closer look at the benefits of good credit and how you could work on improving your own.
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How Do You Get An 850 Credit Score
If you are determined to improve your credit to reach that perfect score for bragging rights, you may have a long journey ahead. There are just a few . If you manage them all well, you can get the best possible 850 credit score.
Start by keeping your revolving credit balances low and consider trying to raise your . These are accounts like credit cards and lines of credit. Some experts a reasonable is when you keep the balance below 20% or 30% of your total available balances. In reality, however, the best balance to get the highest credit score is $0.
At the same time, you should never, under any circumstances, make late payments. You can use automatic recurring payments or sign up for payment reminders to help make sure you dont miss a due date. Just one late payment will keep you from a perfect credit score for at least seven years.
You will also need a large mix of accounts to join the 800+ credit score club. The Self Credit Builder Account counts as one credit line if you are a customer. Perfect credit requires a mix of both revolving credit and installment loans. Installment loans are loans with a fixed payment like student loans, a personal loan, a car loan or a mortgage.
Signing up for new credit can harm your score in multiple ways, and just an application or two in the last two years may keep an otherwise perfect score in the 780-849 range. New stay on your credit report for two years.
California Holds The Top Five Areas With The Highest Concentration Of People With Perfect Fico Scores
Looking at the concentration of perfect FICO® Scores by metropolitan statistical area , California held all top five spots. The San Luis Obispo-Paso Robles, California, area had the highest concentration of perfect FICO® Scores, with 2.27% of its scores reaching 850, according to Experian data from the fourth quarter of 2018. Oxnard-Thousand Oaks-Ventura, California, and Santa Rosa-Petaluma, California, came next with 2.15% and 2.13% of people with perfect scores, respectively. San Jose-Sunnyvale-Santa Clara, California, came in fourth with 2.03% of all scores being perfect. And finally, San Francisco-Oakland-Fremont, California, came in fifth with 1.99% of all FICO® Scores reaching 850.
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Pay Your Bills On Time Every Time
Perhaps the most telling characteristic of people with excellent credit is this: They haven’t missed a single payment in four years of credit history analyzed by LendingTree, and they pay on time, every time.
But that doesn’t mean they’re debt-free. In fact, there’s no way to build credit without borrowing money, since it requires proving you’re able to pay back a lender on time and in full.
Those with excellent credit scores have an average of $126,306 in outstanding mortgage debt, $11,162 in auto loan debt, $4,261 in student loan debt, $2,579 in personal loans, and $392 in unspecified debt, according to LendingTree.
The Benefits Of A Credit Score Of 780 Or Higher
The first benefit, which you can measure with dollars and cents, is interest rate savings. But the benefits dont end there. You can get a lot more with an excellent credit score, such as exclusive products designed just for the most creditworthy borrowers.
For example, some of the best cash back, miles and points-earning reward credit cards are only offered to people with good or excellent credit. Depending on the card, you can get huge signup bonuses, free flights and hotel nights, or cash back to offset your purchases.
The value of some of these cards can be massive. They offer added insurance, purchase protections, and other benefits in some cases. For example, many popular travel cards offer rental car insurance at no added cost.
Some elite cards will even pay for your hotel room if you get stuck somewhere overnight due to weather. Other benefits can include airport travel lounge admissions, free checked bags on airlines, automatic extended warranties and insurance in case a new purchase or cell phone breaks. Check the cards benefits information online for the latest info on just about any popular credit card.
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Spend Less Than You Make
As I said above, Ive never paid a bill late. Thats not because Ive always been wealthy, and its not because Ive never lost a job, gotten divorced or otherwise experienced financial catastrophe.
The secret? Spending less than you make. Do this, and youll automatically create a cash cushion that will come in handy when push inevitably comes to shove. Fail to do this, and when your back is against the wall, youll borrow money you cant immediately pay back and jeopardize your credit score.
Obviously, there are situations that will derail even the best-laid plans. Thats life. But the bigger the cushion you accumulate, and the sooner you do it, the better your odds of achieving and maintaining a perfect credit score.
How To Achieve A Perfect 850 Credit Score
If you’re going after the 850 , then you’ll want to get 21 credit cards as soon as possible and wait. You’ll take 21 inquiries right away, which will pull your credit score down for the next two years. After the two year mark, all the inquiries will fall off.
With your 21 credit cards, be sure you don’t miss any payments. Utilization wouldn’t matter because you can fix that in the future. Set the 21 credit cards aside for nine years to factor into the average age of accounts.;
Starting at the 8-year mark, be sure your utilization is low. Most likely, you are a financially responsible person if you can get approved for 21 cards.
At the nine year mark, you’ll have a low utilization, 100% payment history, 0 derogatory marks, 9+ average age of accounts, 21+ total accounts, and 0 inquiries.;It’s like baking an elaborate birthday cake that you have to wait nine years to eat.;
The big question: What do you get for having an 850 credit score?Answer:;Nothing. You’ll receive the same benefits and interest rates as someone with a 750 credit score.;
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Increase Your Available Credit
Work to increase your available credit over time by applying for new lines of credit. Consider applying for a mix of credit that includes both revolving debt and installment debt . Dont apply for too much credit at once, because that could lower your credit score due to the hard credit inquiries associated with each application. Instead, wait between three and six months before adding another line of credit to your account.
Where Can You Get Your Credit Score
Discover Card You no longer have to be a Discover Card customer to get your free credit score! My Discover Card gives me a free score each and every month from TransUnion, and now they are giving everyone their free score .
To get your free credit score, visit;;and enter your information. In only a few minutes you will have your score.
;I love that Credit Karma is totally free and gives you your credit scores from both TransUnion and Equifax. No credit card is required.
Myfico.com You can also get your scores from all three credit agencies right from the source, MyFICO.com. This option is not free. They offer a few different packages to choose from including monthly packages that include credit monitoring.
I am using the free options to get my free credit score each month, but you can also use the paid option if you choose.
Check Your Credit Report
A good way to start improving your credit score is to see what is negatively impacting it.
You DO NOT need to pay to view your credit report. It is required by law that the 3 top credit reporting companies allow you to see your credit report for free once every 12 months.
To request your free credit report visit annualcreditreport.com
Getting a credit report is a great way to start improving your credit score because it allows you to see what you may have done wrong in the past.
Errors: Looking at your credit report also allows you to see if the credit reporting companies have made any mistakes on your account. According to a study done by the FTC , 26% of people found at least one error on their credit report that negatively impacted their credit score.
Visit myFICO.com to learn more about credit report errors and how to resolve them.
How To Improve Your Credit Scores
To improve your credit scores, focus on the underlying factors that affect your scores. At a high level, the basic steps you need to take are fairly straightforward:
- Make at least your minimum payment and make all debt payments on time. Even a single late payment can hurt your credit scores and it’ll stay on your credit report for up to seven years. If you think you may miss a payment, reach out to your creditors as quickly as possible to see if they can work with you or offer hardship options.
- Keep your credit card balances low. Your is an important scoring factor that compares the current balance and credit limit of revolving accounts such as credit cards. Having a low credit utilization rate can help your credit scores. Those with excellent credit scores tend to have an overall utilization rate in the single digits.
- Open accounts that will be reported to the credit bureaus. If you have few credit accounts, make sure those you do open will be added to your credit report. These could be installment accounts, such as student, auto, home or personal loans, or revolving accounts, such as credit cards and lines of credit.
- Only apply for credit when you need it. Applying for a new account can lead to a hard inquiry, which may hurt your credit scores a little. The impact is often minimal, but applying for many different types of loans or credit cards during a short period could lead to a larger score drop.
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Whats A Good Credit Score
A good credit range depends on where a score comes from and whoâs judging it. And there are different scoring companies, so you can have more than one credit score. As the Consumer Financial Protection Bureau puts it, âBased on your credit reports, you will be given a credit score by the credit-reporting companies. You donât just have one credit scoreâeach company does their own.â
FICOÂ®, which is one credit-scoring company, says scores between 670 and 739 qualify as good. For VantageScoreÂ®, another credit-scoring company, scores between 661 and 780 might be considered good. Scores can also be considered very good, excellent and exceptional.
It may also help to know that credit scores are based on information in your . Scores are calculated by credit-scoring companies, like FICO and VantageScore, using complex formulas called scoring models.
Hereâs how FICO and VantageScore define credit score ranges:
His Total Credit Limit Is High
Droske’s total available credit limit across his six credit cards was $82,700, according to the credit report he provided. Given Americans have an average credit card limit of $22,751, he has much more available credit to his name yet he’s smart about how he uses it. “You have to use it, but not abuse it,” Droske says.
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How The Credit Score System Works
First, in order to understand how you can get a perfect score, you need to understand how the system scores you in the first place.
Like I said, just like you have a class that grades you differently for homework, test assignments, and attendance; your credit score grades you on several different factors as well.
So, if you want a perfect score you have to do well on all of them.
Types Of Credit Utilization
There are 2 different types of credit utilization, per card and overall. Per card is the credit utilization of an individual card. Overall credit utilization is the combination and average of all of your credit card utilization percentages/ratios.
Find Overall Credit Utilization: Add up the credit utilization percentage of all of your credit cards. Then divide that number by the number of cards you have.
Example: Lets say I have 5 credit cards. Their credit utilization ratios are 25%, 40%, 10%, 5%, and 15%. The overall credit utilization percentage would equal 19%.
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