3 Simple Steps to Building the Perfect Credit Score

Posted by Chris on February 19, 2015

The median American FICO score is 723, which is substantially higher than the lowest rating of 300. But what if you're among those who are striving for the holy grail, a credit score of 850?

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Building a Great Credit Score

Working to obtain a perfect credit score is an admirable, if somewhat lofty, goal. As you're strive for this high mark you'll be building on your credit score, which allows you to be considered a low-risk borrower who responsibly manages their debt. These tips can help you raise your FICO score, potentially paving the way for a perfect rating.

  1. Pay on Time – If you're looking for one habit that has the potential to negatively affect your credit quickly, with far-reaching implications, it would be neglecting to pay your bills on time. Late payments will detract from your credit score, so make sure you're not missing any payments.

  2. Be Aware of Your FICO Score – You can't reach your credit score goal if you don't know where you're starting from, so take the time to get a credit report. Even if your credit score isn't where you'd like it to be, you'll know what's on the report and will be able to dispute any errors that have had a negative impact.

  3. Limit Inquiries – Hard inquiries, such as applying for a loan or credit card, will lower your score slightly. This is especially important if you're shopping around for a refinanced mortgage and working with multiple lenders. Choosing one lender to get the best rate can limit the number of inquiries and mitigate damage to your credit score.

Understanding a Perfect Credit Score 

Most lenders will consider a credit rating of 825 exemplary because this is the number where all but the very best and most conscientious consumers' scores begin to taper off. In fact, only 13 percent of consumers score anywhere above 800, and only an estimated 0.5 percent will ever reach 850.

If you're working towards the elusive goal of a perfect FICO score, it's important to first understand that 850 is a constantly moving target. Your credit score changes with each inquiry, so it will temporarily drop when you apply for a new line of credit.

Building a perfect score is difficult, and it's essential to remember your goal will never be permanent. For the vast majority of consumers, a "perfect" credit score is one that allows you to obtain the best interest rates, not necessarily the highest possible rating.

If you'd like more infomration about how to build your credit so you save big money on things like mortgages, auto loans and yachts... just making sure you're paying attention :)  Then download our free guide that tells you everything you need to know.

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Topics: Credit 101