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Wealth and Wants

My quest for a perfect credit score

A look inside my march to 850, plus tips on how you can improve your score

Summary

My credit score has risen by 20 points since January, and I’m just two points shy of a flawless score of 850. Here’s how I’m chasing perfection, and how you can improve your score, no matter where you’re starting out.

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I’m closing in on a perfect credit score!

I currently have an 848 – just two points shy of flawless. That’s up from 828 back in January, when I wrote about the various credit scores I receive from my credit card issuers and my mortgage servicer. This one is a FICO 9 score, which I can view for free every month courtesy of my Wells Fargo Propel American Express® Card. It’s the latest edition of the most-used credit scoring algorithm.

Anything above 740 typically qualifies for the best loan terms. Chasing perfection may seem like a fool’s errand; in this column, I’m more interested in going under the hood to determine which behaviors are affecting my credit scores. This insight can help you regardless of your current level.

There haven’t been any major episodes affecting my credit this year. I haven’t paid any bills late or run up any big debts. If you’ve noticed a big change in your credit score, one of those factors is probably the culprit. Or maybe it was a mistake; the Federal Trade Commission has found 1 in 5 consumers have at least one error on their credit reports.

The changes, in my case, have been more subtle. Here’s what I’ve noticed, and how you can benefit.

See related:  Got an 800-plus credit score? Do these 3 things

Pay more often

I’ve made a concerted effort to pay my credit card balances more frequently in 2019. I don’t mean just paying the statement balances in full to avoid interest. That’s an excellent practice, but I’m talking about something else. I’ve actually been making credit card payments even earlier than that, sometimes two or three per month on each card.

In fact, two of my four credit cards are currently showing $0 statement balances because I paid my monthly charges before the statements were even generated. That helps my credit score for two reasons: a lower credit utilization ratio (credit you’re using divided by credit available to you) is better, and because having fewer accounts with outstanding balances aids your score.

You don’t need to obsess over this, but if you’re looking to improve your score quickly, I’d recommend giving it a shot. My strategy addresses what I view as a flaw in the credit scoring system: If you charge $4,500 on a card with a $5,000 limit, even if you pay that in full before interest accrues, your credit score will suffer because it looks like you’re using 90 percent of your available credit.

The algorithm will treat that as a warning sign that you’re dangerously close to maxing out. In reality, you might have plenty of available funds. If so, I’d recommend using some of them mid-month to knock down the balance before the statement even prints.

I’ve taken this to the extreme, paying two of my four credit cards in full before their last statement dates. My other cards had statement balances totaling just $338 out of $22,500 in available credit – a utilization rate of about 1.5 percent.

By comparison, when I last wrote about this in January, I had balances on three of my four cards. My overall utilization ratio was roughly 3 percent, with a high of 11 percent on one card. All of that was very good, but my credit profile is noticeably better now.

See related:  10 tips to improve your credit score in 2019

Why it’s important

These tweaks helped me jump 20 points in just a few months, and I already had an excellent credit score. Since it’s harder to improve your credit score the higher you get, your score will probably improve even more if you do the same things while starting in the 600s.

Whatever your current utilization ratio is, try to bring it down. Under 30 percent is good and under 10 percent is great. But even if you bring it from 60 percent down to 50 percent, your credit score should improve.

Another thing that has helped me is my most recent hard inquiry – my last credit card application – was about eight months ago. Hard inquiries usually trim 5-10 points off your score in the short term. That impact fades pretty quickly, and my experience backs that up.

Also, because the credit scoring formulas like to see a longer history, I’ve benefited from simply growing older. My oldest account now dates back 15 years and 8 months, and my average account has been open for six years and nine months.

See related:  Why can’t I reach a perfect credit score of 850 points?

By all means, apply for new cards and loans when it makes sense for you. But don’t apply for too many all at once, and be especially careful if you will be applying for a mortgage soon. That’s when you really want to be on your best credit behavior. Get a 0 percent interest card to finance your new furniture purchases after closing.

In summary, while improving your credit score can feel like a long-term pursuit, it doesn’t have to be. You can achieve substantial improvement in as little as a few months. Try lowering your credit utilization ratio by making extra payments.

If you do that along with the basics – paying your bills on time, keeping your debts low and avoiding excessive applications – your credit score should shine.

What’s up next?

In Wealth and Wants

My dead husband’s card debt is hurting my credit score. What can I do?

If you live in a “community property” state, you may be obligated to pay off debts your late spouse incurred during the marriage. However, a deceased person’s leftover card balances should not be appearing on his or her spouse’s credit report. If they do, the surviving spouse should contact the card company or file a dispute with the credit bureaus.

Published: May 23, 2019

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