How to have Perfect Credit
Roughly 1% of the population has perfect credit. Perfect credit would mean a FICO score of 850 on Fair Isaac’s scale of 300 to 850. Earning such a high credit score does not involve fancy tricks. Folks with such a such a high credit score all have the following traits in common:
- Between four and six revolving accounts (this means credit cards).
- At least one “installment” tradeline (e.g., a mortgage or automobile loan) in good standing.
- Several accounts around 20 years old with a long history of positive use. (To get a score above 800, you need 10 years of positive account history.)
- Around 30 years of credit use.
- No late payments (or other serious account errors) for at least the past seven years.
- Very few credit inquiries (no more than 1-3 in a six-month period).
- No derogatory notations — collections, bankruptcies, liens, judgements, etc.)
- Debt levels on credit accounts of less than 35% of their overall credit limit.
Now that you know their simple secret, here’s what you can do to follow their lead and improve your credit and keep it stellar for life:
See what everyone’s saying about you:
Three major credit-reporting agencies are keeping tabs on your everything you do with your credit and finances. If they’re watching, so should you. At least once a year (and a few months before entering into any major loan), review your credit reports from Equifax, Experian and TransUnion. You are entitled to one free copy from each bureau once a year (and more under certain circumstances)
Fix all typos and errors:
Since your credit record spans almost a decade of your borrowing activity, it makes sense that errors sometimes turn up. In fact, a recent study showed that 79% of all credit reports contain errors. This means that your reports have a good chance of having errors. Some common credit-reporting errors include out-of-date addresses, closed accounts being shown as open, credit lines not reported at the correct amount, and erroneous information.
Change your ways, immediately:
Self-inflicted credit wounds (such as a history of late payments, defaults, and general irresponsible behavior) will fade from your record over time. You cannot wipe out accurate information from your credit report. Nor can any firms who offer to do so for a fee. However, it is possible to negotiate removal. Since the most recent behavior on your reports carry more weight than old news, vow that from this day forward you will be a financial upright citizen, and over time your score will grow.
Remember that a credit card is not cash. It represents money you do not have:
Even though you have been approved credit by a bank, a store, etc (Visa, Mastercard, Sears, Kmart, etc.) to borrow thousands of dollars, you don’t actually have thousands of dollars to spend, which leads nicely to the next rule …
Ignore anyone’s rules on what should be an “acceptable” amount of debt:
Your debt-to-income ratio is the measure of how much debt you carry to how much money (after taxes) you have coming in. In the world of lending, it is acceptable to carry 25% of your income in debt. That ratio is still very high. You might want to consider trying to keep your debt (including car loans)to 15% or less of your after-tax income.
In summary:
Based on the above information, you can see there are no secret tricks to keeping your credit score high. Just keep your spending under control, pay your bills on time, don’t apply for credit too often. Follow those rules and your credit score will start to rise.
Daniel Rosen is an author, consumer advocate and founder of Credit-Aid Software.
America's top-selling credit repair software. Get a free demo at www.credit-aid.com.
