How to get a perfect credit score
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Jim Droske, 55, still uses the first credit card he ever opened: a Chase Sapphire card he applied for in 1984 on the University of Illinois Chicago campus in exchange for a box. free of Fannie Mae chocolates.
Today he has six credit cards and a perfect 850 credit score.
Droske, who is president of Illinois Credit Services, a credit counseling company, has long been obsessed with tracking his credit score, and it has paid off.
“The more you pay attention to it, the better your credit will be,” Droske says. CNBC Selection.
We looked at one of Droske’s credit reports that calculated he had a score of 850 using the FICO 8 model (the most commonly used version) to see what components make up that perfect number.
- Your personal identifying information (name, address, social security number, date of birth)
- Number and types of credit accounts
- Credit limits
- Payment history
- Length of credit history
- Difficult requests
- Informal requests
- Collection accounts
Here’s what we found when we looked at Droske’s credit report:
Droske has six credit cards, two installment loans (both of which are auto loans) and a home loan (a mortgage). This variety of credit is important.
When lenders make a decision on what loans or interest rates to offer you, it helps. “They want to see how you handle different types of debt,” Droske says.
Droske’s total available credit limit on his six credit cards was $ 82,700, according to the credit report he provided. Since Americans have a average credit card limit at $ 22,751, he has a lot more credit available to his name, but he’s smart about how he uses it. “You have to use it, but not abuse it,” Droske says.
Although Droske points out that his balance naturally fluctuates from month to month, on this credit report it was a total of $ 638. It is very low compared to that of Americans average credit card balance of $ 6,194.
Typically, Droske says he will charge for all utilities that allow credit card payments, such as his gas, electric, phone, garbage and alarm bills. “Plus any expense for food, household items, races… pretty much anything that can be billed that doesn’t require money, “he says.” But I’m not trying to charge for expensive stuff like car, mortgage or scholarship fees. Bigger stuff like this is often not allowed to be billed or there is a premium to pay use a credit card so I don’t care about that. “
But no matter what Droske charges on his credit cards each month, the bottom line is that he doesn’t spend more than he normally would just because he has the flexibility to pay by credit.
“That’s the problem for a lot of people, they charge more because it’s easy and they can,” Droske says. “My spending habits haven’t changed – just the way I pay for things.”
Because Droske’s credit limit is high and his balance is low, his credit utilization rate, or the percentage of the total credit limit that he uses, rounds up to 1% on his credit report. “It’s actually a hard number to hit unless you have high credit limits,” Droske says. Experts recommend keeping your utilization rate below 30%.
The average age of Droske’s accounts is 10 years and 11 months according to the report reviewed by CNBC Select. His oldest account is 34 years and 10 months old.
Droske learned early on the impact of people’s credit on their purchases during his first job in finance working for car dealership loans.
“I would see two people buy the same car on the same day, and one person would get 5% [finance rate] and the other person gets 19% based on credit, “Droske says.” It taught me really quickly the impact of credit, and then I was really curious what made that number move.
A difficult investigation, or “hard pull,” means that a lender or credit card issuer has pulled your credit report from one of the three major credit bureaus, Experian, Equifax, or TransUnion. Serious requests can cause your credit rating to fluctuate slightly, compared to an informal request, which does not attract your credit and has no effect on your rating.
Of the two difficult claims listed in Droske’s credit report, one is over 12 months old and therefore no longer factored into his credit score. The second survey took place three months before the report, but didn’t affect his score at all. “Each request does not automatically deduct points from your credit report,” says Droske.
Perhaps the most important factor in your credit score is on-time payments. In fact, FICO and VantageScore both list payment history as the primary factor in calculating your credit scorebecause paying your bills on time shows that you pose a lower credit risk to lenders.
According to FICO, approximately 98% of “FICO High Achievers“Have no late payments.” And for the 2% who do, the overdue payment happened, on average, about four years ago.
So during miss a credit card payment can be easy to do, keeping control of your payments is the only way to reach an 850 day.
Of course, you don’t need to score an 850 to even qualify for the best rewards cards. With good or excellent credit, you may be eligible for American Express® Gold Card, which gives members 4X points per dollar on qualifying purchases at restaurants around the world, 4X points at U.S. supermarkets (up to $ 25,000 per calendar year in purchases, then 1X) and 3X points on flights booked directly with airlines or on Amextravel.com.
Editor’s Note: Scoring models have different algorithms and credit scores may vary from day to day. This specific breakdown was based on Jim Droske’s credit report pulled on December 18, 2018, which used the FICO 8 model. Jim Droske recently obtained a Wells Fargo credit score using the FICO 9 on March 4, and it shows a perfect 850. But a credit report he pulled on March 11 using the FICO 8 model shows 842. A perfect credit score on a report doesn’t mean the same for every scoring model – but it does. will probably be close.
Editorial note: The opinions, analyzes, criticisms or recommendations expressed in this article are those of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.