Is credit score perfection possible? Yes, according to recent data from the credit reporting agency Experian. America's average credit score on the 300-850 FICO scale is 701, but 1.2% of all consumers have a perfect 850.
Experian pored over data from the fourth quarter of 2018 to look for common threads in perfect credit score profiles. Do you need lots of money, a few credit cards, or no debts? In order – no, no, and no.
Credit scores are all about using credit regularly and managing it well. Primary factors in calculating your credit score are on-time payments and credit utilization – how much credit you use compared to your limits, both overall and individual accounts. Your income is irrelevant.
Experian data backed up this premise. Perfect credit scores are spread throughout all income levels. Just over 38% of perfect credit scores belong to people with annual incomes of $75,000 or less – and 8% of perfect credit scores come from the lowest income level ($25,000 or less).
You can't build a good credit score by using credit sparingly, either. The perfect-credit-score crowd had an average of 6.4 open credit card accounts, compared to the overall average of 3.8 cards. Creditors want to know that you can handle credit responsibly. The more accounts you can handle well, the lower your overall risk is to lenders.
The other key to a perfect credit score is to keep your debts low but not non-existent. Americans averaged $6,445 in credit card debt, but those with perfect credit scores only averaged $3,025. With a perfect credit score, you're more likely to have a higher credit limit – driving your credit utilization down even further if you spend less than the average consumer.
In all other debt categories except mortgages and personal loans, consumers with perfect credit scores had a higher number of credit accounts but less overall debt.
It doesn't take decades to build a perfect credit score – although the majority of perfect credit scores (58%) were held by Baby Boomers while Generation X accounted for another 25%. Millennials held 4% of perfect scores, and even a few Generation Y members had perfect scores.
How do you achieve credit perfection? Steven Millstein, a credit repair consultant at CreditRepairExpert.org, suggests taking an honest look at your current financial situation, including a review of your credit report. What's keeping your score down? Millstein advises, "If you find any mistakes, you want to contest them immediately." Errors or fraudulent charges could be signs of identity theft. Let MoneyTips protect your credit and your identity with a free trial.
Assess your income and expenses and adjust your budget accordingly. Millstein suggests finding the maximum you can afford to pay toward eliminating debts and wiping out debts as quickly as possible.
"You'll want to patch up your credit utilization ratio as quickly as you're able to," suggests Millstein.
When you're financially able, open new accounts and use them regularly but with low spending amounts. Over time, your credit score will rebound by following the formula – multiple credit accounts with low total debts and on-time payments.
A perfect credit score requires planning skills and the discipline to carry out your plans. However, you shouldn't obsess over the last few points. If your credit is in the exceptional range (800-850), your goal is to keep it there. There's little practical difference between the low and high end of exceptional credit.
Don't talk yourself out of an improved credit score because you think that you don't make enough money, or you have too many expenses. People at all income levels can achieve a perfect credit score – and you can do it, too.
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