Go from Zero to the Highest Credit Score Possible with These 5 Simple Steps
Did you know that less than 1% of the US population has a perfect credit score?
Hitting that coveted 850 can seem impossible, especially when your score is already low. But with the right background and motivation, anyone can have the highest credit score possible.
Do you want to own a home in the next year? Are you looking for loans to go back to school or get a new car? Do you have an interest in being in the best financial position possible?
If you answered yes to any of those questions, you need to read this post.
How to Get the Highest Credit Score Possible: 5 Tips
Credit scores are absolutely crucial for any financial decision you want to make, but they also take time to build.
We won’t be able to tell you how to magically improve your credit score overnight. But we can give you some solid information that can put you in a much better place score-wise.
If you’re ready to get that perfect credit score, follow the tips below.
Pay Bills on Time
We know that this is easier said than done, but it’s one of the quickest and most effective ways for you to boost your credit score.
You may not know this, but your payment history is one of the most important things credit card bureaus look at when they determine your credit score.
Payments that are delinquent even by just a few days can have a negative impact on your credit score. Don’t assume that there’s a grace period before reporting, it’s in your best interest to pay bills as soon as they’re due.
If you’re interested in raising your credit score, your credit card and loan payments need to be a priority. Take time to look at your budget and make sure that you’ll always have money when bills are due.
It can be helpful to set reminders if you have trouble remembering to make payments. Set a reminder a few days before your bills are due so that they’re on your mind, and set an additional reminder for the day they’re due.
Keep Credit Cards Open
When you’ve paid off a credit card you may feel the urge to close your account. This may sound strange, but it’s better for you to keep your accounts open and to not use them than to close them completely.
Your credit history plays an important role in your credit score. A long history of credit gives potential lenders more information and gives them a more comprehensive picture of your creditworthiness.
Unless you have cards with a high annual fee, it’s in your best interest to keep them open. A long credit history could be seen as a sign that you’ve been able to obtain and manage credit for a long period of time.
Have the Right Debt Combination
Sometimes it’s not about the amount of debt you have, but the kind of debt you’re carrying. Having a good mix of debt can be much better for your credit score instead of having a single type of debt.
There are many different kinds of debt you can take on. Some people have mortgages, other people have bank and business loans. You could also have student or vehicle loans or retail credit cards.
People that have a mix of different kinds of credit are seen as less risky than people with one kind of credit. Reduce your debt where you can and look into diversifying it.
Say No to Minimum Payments
We just talked about the importance of paying your bills on time. Making payments at the right time is a good start. But if you really want to put a dent in your debt and improve your credit score, you need to do more than the minimum.
Paying more than you owe each month on your outstanding debt has a variety of benefits. You’ll be reducing your overall debt load and get closer to paying off your debt faster.
You don’t have to make the payments huge. If you could start by adding an extra $10 or $20 dollars a month you’ll be getting closer to your end goal of paying off the debt completely.
If you’re struggling to pay multiple credit cards or loans, it may be a good idea to focus on reducing one area of your debt.
You can make minimum payments on your other debts that make sure that you’re up to date, and focus on paying off chunks of the debt you’re focused on. Once you completely pay off the balance on one, you can do the same for your other debts.
Avoid Spreading and Spending
It isn’t uncommon for some people to try to get ahead of their debt by using more credit cards or loans to get out of debt. Taking out new lines of credit can be a short term solution, but they’ll just add to your long term problem.
We briefly mentioned that your payment history is a big part of determining your credit score. Another big factor is the amount of money you owe in comparison to the amount of credit available.
The amount of credit available is commonly referred to as your open credit utilization rate. It’s always a good idea to not be near or even close to the overall limit on credit cards.
Lenders and creditors pay very close attention to the utilization ratios for potential borrowers. People with a high utilization rate can be seen as someone that’s less likely to pay back what they have borrowed.
If you have a low credit utilization rate, you show potential lenders that you’re a responsible borrower that takes paying down their debt seriously.
Build Your Credit the Right Way
When you have the right knowledge, getting the highest credit score possible is easy. Once you keep up with payments and make building your credit your focus, getting to 850 can be a snap.
Do you want to learn more about the right way to build your credit? We have a lot of articles that can help you reach your financial goals.
Check out our post on common credit problems and the best way to fix them.