All scoring models are not similar. FICO scores range from ‘poor’ to ‘excellent’ to measure your financial health. A credit score helps lenders understand how responsibly you use credit. Understanding a credit score range is the first step to achieving the highest credit score.
- Poor: 300-579
- Fair: 580-669
- Good: 670-739
- Very good: 740-799
- Exceptional: 800-850
Your credit score is essential since lenders use this three-digit number to determine how risky of a borrower you may be in repaying debts on time.
How to get the highest credit score
In 2019, FICO issued research about the behavior of the U.S. public who attain scores of 800 or higher using the FICO Score 8 model. All of them followed a similar framework to achieve high scores.
Some of the steps these individuals continue to follow include:
Paying credit bills on time
About 96% of the consumers with excellent credit scores keep continuous track of their credit payments and pay them on time. To decrease your chances of missing any credit payment, register in autopay or use a bill management app to get reminders of the due dates of your credit card payments.
Aim for low utilization of credit cards
According to FICO, after payment history, credit utilization is the most important factor to study credit usage. The credit utilization ratio is a mechanism to quantify the amount of credit you use versus the amount available on your credit card. Consumers with an 800-plus rating use a 30% portion or less of their credit limit.
Reviewing the credit score
You can’t avoid reviewing the score to look for errors and check what’s helping or hurting it. Make sure you do so by soft and hard inquiries so that your score isn’t broken down.
Keeping old accounts open
Those with high FICO scores have older accounts open for an average of 11 years. The older your credit age, the more admiringly you appear to lenders. Remember keeping an account open is not enough, as credit inactivity may result in closing the account. Contact lenders beforehand to make sure about the account details.
Avoid applying for credit too often
While you are applying for a loan, a lender pulls off your credit history, which causes a hard credit inquiry to show up on your report. This hard inquiry report includes the application for a new credit card, mortgage, loan, or some other form of credit. According to FICO, each new hard credit inquiry lowers your score by up to five points if you apply in a shorter period, thereby damaging it.
If your goal is to attain a perfect credit score, you have to aim for a credit score of 850. That’s the highest FICO score and VantageScore available for the most widely preferred versions of credit scoring models.
Although there is no guarantee you’ll achieve perfection, at the very least, it’s nice to have a near-perfect score. Once your score gets nearer to 780 or higher, lenders see you as a low credit-risk personality. You’ll typically be qualified for the best interest rates and terms on various financial services, good product offers, and guaranteed loans that fit your income level.
