At any given time, roughly 1% of people have perfect 850 credit scores. And Fair Isaac Corp., the company that created FICO scores back in the 1980s, tells Codetic that just about 22% of U.S. consumers have scores above 800.
And yes, you could be one of them — if you play your cards right.
Here are some simple steps you can take to work toward that perfect 850, no matter where your credit score stands now:
1. Spot the Errors on Your Credit Report
Did you know your credit score could be inaccurate? One out of five credit reports have an error, according to the Federal Trade Commission.
To keep a close eye on your credit and easily catch any errors that are dragging down your score, get your credit score and a “credit report card” for free from Credit Sesame. It breaks down exactly what’s on your credit report in layman’s terms, how it affects your score and how to address it.
Because it simplifies everything, you should be able to spot and dispute any errors.
You can file a dispute online for free with the appropriate credit bureau. After you fill out an online form, most disputes get investigated within a month.
2. Use Less Than 30% of Your Available Credit
An important part of your credit score is “credit utilization.” That’s a fancy-pants way of saying “how much of your available credit you’re actually using.”
Let’s say you have a credit card with a $2,000 limit on it, and you have a balance of $1,000 that you haven’t paid off. You’re using half your credit. Your credit utilization is 50%.
Many experts suggest keeping your ratio no higher than 30%. But the lower, the better.
This makes more difference than you might think — it accounts for 30% of your credit score.
3. Don’t Apply for New Credit Too Often
Mix up your credit use with credit cards, loans, and more. This variety — called your “credit mix” — accounts for 10% of your score.
But be choosy when applying for new credit cards and loans.
Once you have an account, Credit Sesame will let you know your chances of being accepted for credit cards, mortgages and other loans. That lets you know what’s most likely to approve you, so your credit report won’t be dinged for rejected applications.
4. Stick Old Credit Cards in the Freezer
The length of your credit history accounts for 15% of your credit score, so closing old credit cards could actually hurt your score. Instead, when you’re ready to stop using an old card, freeze it.
Literally — in the freezer it’ll go.
Sure, it sounds extreme, but making it unavailable can help your credit utilization and help you save money without losing your aged credit history. When you’re tempted to spend, you’ll have to wait for the card to thaw, requiring you to think through your spending decision.
5. Set Your Bills to Autopay
Your payment history accounts for 35% of your credit score, so stay on top of it. Set your credit card and utility bills to autopay if you can. If you are concerned about automating, instead set reminders in your phone or calendar before bills are due, so you don’t forget to pay.
Running out of money each month before your bills are paid off? Consider creating a budget. Ew, gross. We know. But it’s a simple way to make sure you don’t spend more than you have.
Plus, we recommend a super simple budgeting method called 50/20/30 that won’t overwhelm you with spreadsheets and spend tracking. Here’s how it works:
- 50% of your income goes toward essentials.
- 20% goes toward financial goals, such as retirement or the down payment on a house.
- 30% goes toward personal spending.
It’s a quick and easy way to see how your expenses stand up and to rein in spending to make sure the essentials are always covered.