Achieving a score of 850 is definitely hard, but definitely not impossible. Having a credit score of 850 won’t change your life if you currently have an 825, but it will maximize your potential for a low interest rate and a high approval rate for loans. In order to achieve an 850 credit score, there are certain factors that come into play, such as credit card use, payment history, derogatory marks, credit age, total accounts and hard inquiries.
Credit card use refers to how much credit you are using compared to your total limit. For example, you have a limit of 500 dollars and you’ve used 200 dollars. That is your credit card usage at that moment. Payment history refers to the percentage of payments you’ve made on time in a given time frame. Let’s say you have 10 payments on your account and you’ve paid 9 of them. Your percentage of payments would be 90%. Derogatory marks refer to collections, tax aliens, bankruptcies or civil judgments on your report. For example, if you owe a 2,000 dollar hospital bill and you do not pay it, that would be considered a derogatory mark.
Credit age is pretty simple: it is the average age of your open accounts in a specific time frame. Total accounts refers to the total number of open and closed accounts you have. Hard inquiries are the number of times you have applied for something. Let’s say you want to purchase a car off a car lot. They run your credit to check if you can make these car payments and if you are trustworthy. That would be a hard inquiry. Only have companies run your credit if you are sure you want to purchase something or need to. The more hard inquiries you acquire, the more it goes against your credit. You need to have an excellent score in all categories to have a score of 850.
Ideally, you would have relatively old accounts, a high pay percentage, a lower amount of usage, low derogatory marks and low hard inquiries. An important point to keep in mind is to never utilize your credit card more than 30% of the total amount that card allows. Credit card usage really plays a big role in your credit score. In terms of payment history, even if you pay the minimum amount every month, it will remain at an excellent level. Set up email alerts to remind you the payment due date is coming up so you do not miss your payment.
Coming up on derogatory marks, do not ever try to default your credit. If something ever happens in your life and you can’t make a minimum payment, try to get a balance transfer card and make a payment until your life situation improves. Derogatory marks also play an important role in making up your credit score. After all, pain is not permanent, right?
For credit age, it is about the length of the time you opened a particular card and maintained it. For example, if you opened a card 10 years ago and opened another one yesterday, your credit age will not be 10 years now that you opened a new one, but somewhere around two years. For total accounts, the excellent level for this category is around 20. If you have 20 or more closed or opened accounts, your total accounts metric score will be excellent. Finally, coming up on hard inquiries, even though the impact is low, do not open too many credit cards.
Remember that having an 850 credit score will not have a special card for you with 0% APR forever. You may receive a better interest rate or be more eligible for loans, but do not stress about it if you have an 800. Just remember, decent or good credit is better than no credit.