The FICO score is one of the most popular credit scores in the United States used by credit bureaus. This was created by the Fair Isaac Corporation (FICO) and stretches from as low as 300 to up to 850 points. The closer increase of the FICO score to seven hundred and fifty means that credit risk is lower in the eyes of the lenders. But as a number, you may wonder what makes the best FICO score possible or the meaning of the word ‘possible’.
The Highest FICO Score The FICO score has a maximum value of 850. It means you have perfect credit by the FICO model for you to have this perfect triple-eight score. It is seen that less than one percent of all applicants with FICO scores attain this level of creditworthiness. One would need to have some time in his credit history with a perfect record of handling credit responsibly to get to 850. Even if you managed to keep your credit score high through most of your days, a few late payments can bring it down. So one has to pay their bills and ensure that the credit card debts are not left unpaid over a long period.
It is highly unlikely that anyone will ever get to 850, let alone all of the people that some of you claim to be so active on social media. More realistically, it will likely fall between 760 and 850. Despite this range, these scores can still be considered within the Very Good to Exceptional credit tier. You will be eligible for the most favorable loan terms in this category which includes the interest rates. Anything above this is considered to be very good and those people who have FICO scores over 800 can boast of being credit maestros.
As mentioned above, the FICO Score is calculated based on data from the three major credit reporting agencies, Equifax, Experian, and TransUnion. The FICO algorithm considers data in the credit reports that are compiled by the three major credit bureaus: Experian, TransUnion, and Equifax. Data evaluated includes you:
- Payment history
- Amounts owed
- The number of accounts with a credit history
- Credit: by types and mix
- New credit applications
Payment history weighs the most as it accounts for 35% of your score. That is why one needs to ensure that all the bills are paid as they are due to prevent any form of delay. High credit card balances could negatively impact the scores more than any other factor because the amounts owed are one-third of the credit scoring model. This was followed by a pointer that maintaining balances below 30% of the credit limit is beneficial to scores. Therefore, the length of positive credit history and a lower number of new accounts or hard inquiries contribute to improving the scores but not to the extent of the above factors.
Here is how people can attain a spotless FICO score of 850 To attain the FICO of 850, which is possible, credit management and establishment have to be done over several years.
Key steps for hitting 850 include:
- Always is to pay all bills on time – this could entail setting up autopay. One single late payment that occurs 30 days after the payment is due could reduce the scores by 100 points.
- Try to maintain credit card balances below 10% if possible because any increase in credit utilization ratio is seen negatively by the credit reporting agencies. While some balance of letting some report builds scores, high utilization negatively affects it.
- Some of the credit cards have been open for many years. The average age is a moderate factor in FICO scores and thereby maintaining the oldest cards active avoids lowering the average age. If required, close newer cards.
- For new credit, do not apply too often so that new inquiries do not lower scores in the process. Having too many new accounts open up at once is suspicious if only you want credits. Ensure that no two related applications can be submitted within a short span of each other, preferably not within 6 months.
- Have both credit cards and installment credit like mortgage or car loans and student loans proving positive repayment history – diversification is good. Do not use cards from departmental stores or renting companies as the limits are usually low this will affect the credit utility ratios.
- Review each credit report at least once each year and challenge qualifying adverse items that would affect credit scores. Don’t lose track of your data and don’t let a silly error in reporting bring your high score dreams down.
Maintaining the Perfect Score Achieving such a FICO top can turn out to be very hard. Nevertheless, being able to get there implies more effort and commitment to maintain that figure of 850. When future bills and debts arise, you will need to continue using the proper credit habits learned here. With one error such as a 90-day late payment, your score can easily drop over 100 points. People attribute life to happening so that some of these setbacks will not affect our scores for eternity. But reconstruction to 850, requires a collective and long-term approach in case of emergence of difficulties later.
There are only a handful of individuals who can reasonably afford to sustain a spotless 850 FICO score throughout their entire credit borrowing years. It may be a cliché but the fact remains that even the most noble of individuals can get caught up in some form of financial crisis. The good news is excellent credit is not only a small subset of individuals, those who have achieved a top-perfect score. Lenders give most of the sweet treatment and low interest rates similar to those offered to those with 850-FICO elites to consumers with Very Good scores in the 700s.
The idea of shooting for the stars is always useful for elevating your credit standing as a borrower. However, aspiring for the perfect triple-eighty score as the be-all-end-all of financial success predestines most borrowers for disappointment. They are all true, however, if one manages credit responsibly over time, your scores will not only be good but significantly above the average even if not perfect to meet the finicky FICO standards. Remember that it is always best to remain patient and keep your sights on the end goal of creating a good credit history for each new phase of borrowing requirements in a person’s lifetime.
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