Hard Truths and Smart Moves: 5 Secrets to Achieving a Perfect 850 Credit Score

A perfect credit score can serve as an open door for American consumers. In fact, even a credit score that’s considered “very good” can make it possible for you to make major purchases with favorable interest rates. However, for millions of people, the thought of achieving a score of 850, which is considered “perfect,” seems to be a pipedream.

According to studies, only 1.5% of American consumers have a perfect credit score, while 22% of consumers have a score of 800 or higher. While that is a drastic jump, it still represents only a fraction of the hundreds of millions of consumers who make up the market.

If you have a sub-800 credit score, you may assume that there’s nothing you can do. That’s largely because there are so many things that can put a ding on your credit report. Everything from a couple of missed utility payments to a maxed-out credit card can bring your score lower, and depending on how you rectify those issues, your score may continue dropping.

Per Experian, people with perfect credit scores tend to be a bit older. However, no matter where you are in life, you can pursue a perfect credit score. If you’ve been wondering how to improve your credit score, take a look at these five tips that can make you a more powerful purchaser who will have no issues getting approved for credit cards, mortgages, and other major financial transactions.

1. Always Pay Your Bills on Time

Payment history is the most important piece of your credit history, making up 35% of your final score. Any lender who is considering offering you credit or a loan wants to know how likely you are to repay them on time. If you have a long history of late and missing payments, you’ll significantly reduce the likelihood of anyone offering you credit. Even if you do manage to find a lender to approve you, you’ll probably end up paying astronomical interest rates. If you’re applying for a loan to purchase a home or vehicle, you may also have to make a huge down payment or pay for mortgage insurance.

Sara Rathner, a credit card expert with NerdWallet, says, “All of the hard work that you’ve been doing can be undone with one missed payment.” A missed payment is a payment that is more than 30 days late. While the goal is to never miss a payment, it is important to remember that there is usually a grace period, especially for people who have no missed payments on their record.

If you generally make your payments on time, your creditor may not report a single missed payment, especially if you contact them and make the payment quickly. However, if missed payments are the norm for you, creditors will quickly report another missed payment, resulting in your score coming down even more.

One of the best ways to protect yourself from the dangers of missed payments is to set up automatic payments or calendar reminders. If you have a history of late payments, trying to eliminate the risk of forgetting a due date is an effective way to keep yourself from more dings on your report.

Keep Your Credit Utilization Low

The second-largest factor on your credit report is how much of your available credit you’re using. Known as credit utilization, this figure makes up 30% of your total score. When you look at your credit report, the word “utilization” may not appear. Instead, it’s usually represented by the words “amounts owed.” This figure will be shown as a percentage on your report. Ideally, you’ll keep this number under 30%, but experts agree that you should aim for 10% or lower if you want to move your credit score closer to 850.

Not only is credit utilization a major factor, but it’s also incredibly tricky when it comes to managing it. The goal is to use as little of your available credit as possible. For instance, if you have three credit cards with a total maximum of $20,000, you want to use as little of that $20,000 as possible. If you only have $2,000 in outstanding debt on those cards, your credit utilization rate would be 10%, which is where experts recommend you keep it.

When it comes to credit utilization tips, the most powerful way to keep it low is to pay your cards off each month. Still, it’s possible to ding your credit by having a high balance, even if you pay it off each month. If you make a $1,000 purchase on a card with a $2,000 limit, your card issuer will report that you’re using 50% of your available credit during the month, which can lower your score.

Consider making multiple small payments throughout the month. This credit utilization tip can help you keep more credit available, which raises your score.

Establish a Credit History

When it comes to achieving the perfect credit score, you need to have a good credit history. However, many people struggle to find a balance between establishing a credit history and using too much of their available credit. While it’s not as impactful as the first two areas we’ve discussed, the length of your credit history makes up 15% of your FICO score.

Hypothetically, let’s say that you have three credit scores that you rarely use. If you choose two of those cards that have a $0 balance and close them, you’re lessening the amount of available credit that you have. This can negatively impact your score.

Experts in the field agree that it’s a good idea to keep those cards with $0 balances open, even if you have no plan of ever using them again. When creditors look at your report and see that you have accounts that have been open for years and there’s no balance owed on them, they will recognize that you have a long credit history, while also boosting your score since you have so much available credit.

Don’t close out cards that you don’t use anymore. They’re not costing you anything by existing, and the available credit that they offer can actually increase your score.

Review Your Credit Reports Regularly

According to studies, 50% of people find errors on their credit reports. Many of those errors can bring your credit score down. Since you don’t want to lose points based on something that isn’t even accurate, it’s important to keep a watchful eye on your credit report. Experts agree that checking your credit report once a year is a great way to make sure that there’s nothing inaccurate bringing your score down.

Many banks and other platforms will send you alerts when your credit score changes, and all you have to do is opt in to those notifications. Additionally, you can use websites like AnnualCreditReport.com to check your report for free.

Knowledge is power when it comes to improving your credit score. The 1.5% of people who have a perfect score of 850 didn’t achieve that score by taking a passive, uninformed approach to their credit. They stayed informed and took the steps that needed to be taken.

Limit Hard Inquiries

It may seem a bit counterintuitive, but when it comes to how to improve a credit score, one of the best ways is to minimize the amount of “hard inquiries” that you allow into your credit report. Applying for things like credit cards, mortgages, and car loans results in a hard inquiry into your credit. This means that potential lenders look at a detailed version of your credit history to determine whether they’re going to approve your application. These hard inquiries can lower your score for up to 12 months, and make up about 10% of your total score.

While a few inquiries aren’t seen as a big deal, applying for too many credit products in a short period can raise red flags for lenders. If you’re about to apply for a major source of credit, like a mortgage, hold off on opening new lines of credit before. If you’re shopping around for better rates among lenders, try to submit all of your hard credit inquiries within a short period. Experts recommend keeping them between 14 and 45 days.

Do you want to join the 1.5% of Americans who have a perfect credit score? These tips can help you climb to the top of the credit score mountain, no matter how close you are to the base right now.