Today, let’s dive into a topic that impacts all of us: how to achieve a perfect credit score.
As you know, this blog is not just for information. My goal is for us to apply the the information to make our lives better. So I’ll focus on practical tips to guide you on your credit-building journey.
5 Key Factors to Boost Your Score
To achieve a perfect credit score, you’ll need to focus on five critical factors. Let’s dive into each one:
1. Payment History (35%):
- Your payment history wields the most significant influence on your credit score.
- Consistently paying bills on time—whether it’s rent, credit cards, loans, or phone bills—is essential.
Take action now:
Gather all your recent bills and note their due dates.
If you use online banking, set up automatic payments at least 10 days before the due date (ensuring sufficient funds).
2. Credit Utilization (30%):
- Credit utilization measures how much credit you’re using compared to your total available credit limit.
- Aim to keep your utilization below 30% (excluding bills, mortgages, and student loans).
- Focus on credit cards, lines of credit, and other revolving loans.
- Ideally, use no more than 10% of your available credit at any given time.
Request higher credit limits to improve your utilization ratio.
3. Length of Credit History (15%):
- The age of your credit accounts matters.
- Avoid canceling old credit cards—especially if you’re tempted to use them.
- Some suggest freezing cards, but let’s be practical: Cut them up instead.
- In five years, when your bank sends a new card, cut that one too.
4. Recent Credit Inquiries (10%):
- Be cautious about authorizing credit checks.
- Before allowing anyone to run your credit, ask if it’s a hard or soft inquiry.
- Monitor your credit reports for errors and dispute any discrepancies promptly.
If you’re aiming for rapid score improvement:
Avoid unnecessary credit applications.
Space out credit requests strategically.
5. Credit Mix (10%):
- Lenders appreciate a diverse credit portfolio.
- Maintain a mix of credit types, including credit cards, car loans, and lines of credit.
- Show that you can handle different types of debts responsibly.
How To Get a PERFECT Credit Score in 2024
You can learn from my experiences, and avoid the pitfalls I encountered. Here are the essential steps I took to improve my financial health back in 2018:
- Understanding Spending Habits:
• There’s a saying that you cannot improve what you don’t measure.
• Take a close look at your spending patterns. Identify where your money goes and areas where you can cut back.
• Awareness is the first step toward financial control. - Creating a Budget:
• Develop a realistic budget that aligns with your income and financial goals.
• Allocate funds for essentials, savings, and debt repayment. - Paying Down Debt:
• Prioritize paying off existing debts. Whether it’s credit cards, loans, or other obligations, tackle them systematically.
• Aim to pay off high-interest debts first. - Establishing an Emergency Fund:
• Life is unpredictable. Having an emergency fund ensures you’re prepared for unexpected expenses.
• Save a portion of your income regularly. - Planning for Major Purchases:
• Whether it’s a car, home, or other significant expense, plan ahead.
• Consider how these purchases fit into your overall financial picture. - Improving Your Credit Score:
• We live in a credit-driven society, so a good credit score matters.
• Now, let’s talk about what makes a credit score “good.”
Achieving a perfect credit score isn’t always necessary.
Scores in the high 700s or low 800s are generally sufficient for most financial goals.
What Is a Good Credit Score?
Credit scores vary based on the scoring model, but here’s a general overview:
Scores in the high 700s or low 800s are generally sufficient for most financial goals. Focus on building good credit habits, and your score will naturally improve over time.
Advantages of an Excellent Credit Score.
Mission: Help 1 person apply the information that will make them 1% better.
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The financial information provided on this page is for educational purposes only. I do not offer advisory or brokerage services, nor do I recommend or advise investors to buy or sell particular stocks, securities or other investments. You are responsible for all decisions you make, or any actions taken based on this content. Some of the links in this blog are affiliate links. If you make a purchase through these links, I may earn a small commission at no extra cost to you. This helps support the channel and encourages me to keep making content like this. Your support is very much appreciated. Thanks for reading and watching.
