How can I get a perfect credit score?
July 17, 2013 8:42 AM Subscribe
How can I get a perfect credit score? I have no debt and plenty of cash.
I am an extremely fortunate person. I have a stable high-income job, plenty of savings and no debt.
I recently signed up for a second credit card because it offered better security features, and noticed during this process that my credit score is 695. The reasons listed were:
1. Proportion of balance to credit limits on bank/national or other revolving accounts is too high
2. Lack of recent installment loan information
3. Length of time revolving accounts have been established on your credit report
4. Too many inquiries in the last 12 months
Relevant things:
I'm in my early 30's, make $75k/yr. I own my home and cars. I paid off my mortgage and car loans years ago, and when I did have them I paid each month in full and was never late (#2?). I pay my credit card balance in full each month, but I do use it for lots of purchases (#1?). I had perhaps naively assumed using a credit card often and paying it in full was good for my credit score. I've pulled my own credit report and didn't see anything weird on it, but only got my actual FICO score after applying for this second credit card.
I've had these accounts for years, so I don't get #3, and I have no idea what #4 is about. I thought I had locked my credit report from inquiries, and other than the new credit card, I've taken no actions that would have resulted in a credit check in years. Would the fact that I pulled my own credit report count against me?
What exact steps should I follow to get a perfect credit score? It seems that most people are prevented from following the ideal advice due to lack of funds, or due to having lots of existing debt. Assuming these factors aren't present, what are the exact conditions I need to build to look like a perfect creditor on these reports?
If you have links to other forums or books on this subject that would also be appreciated.
I am an extremely fortunate person. I have a stable high-income job, plenty of savings and no debt.
I recently signed up for a second credit card because it offered better security features, and noticed during this process that my credit score is 695. The reasons listed were:
1. Proportion of balance to credit limits on bank/national or other revolving accounts is too high
2. Lack of recent installment loan information
3. Length of time revolving accounts have been established on your credit report
4. Too many inquiries in the last 12 months
Relevant things:
I'm in my early 30's, make $75k/yr. I own my home and cars. I paid off my mortgage and car loans years ago, and when I did have them I paid each month in full and was never late (#2?). I pay my credit card balance in full each month, but I do use it for lots of purchases (#1?). I had perhaps naively assumed using a credit card often and paying it in full was good for my credit score. I've pulled my own credit report and didn't see anything weird on it, but only got my actual FICO score after applying for this second credit card.
I've had these accounts for years, so I don't get #3, and I have no idea what #4 is about. I thought I had locked my credit report from inquiries, and other than the new credit card, I've taken no actions that would have resulted in a credit check in years. Would the fact that I pulled my own credit report count against me?
What exact steps should I follow to get a perfect credit score? It seems that most people are prevented from following the ideal advice due to lack of funds, or due to having lots of existing debt. Assuming these factors aren't present, what are the exact conditions I need to build to look like a perfect creditor on these reports?
If you have links to other forums or books on this subject that would also be appreciated.
If you don't need credit, who cares about the score?
You can open a bunch of new accounts, then don't use them. Then you'll fix number 1. But you'll aggrivate #4.
695 is okay. It's not keeping you from anything you want to do and you're WAY more financially stabile than most Americans.
You can go to My Fico for more info on credit scores, but it is kind of a racket.
posted by Ruthless Bunny at 8:56 AM on July 17, 2013 [3 favorites]
You can open a bunch of new accounts, then don't use them. Then you'll fix number 1. But you'll aggrivate #4.
695 is okay. It's not keeping you from anything you want to do and you're WAY more financially stabile than most Americans.
You can go to My Fico for more info on credit scores, but it is kind of a racket.
posted by Ruthless Bunny at 8:56 AM on July 17, 2013 [3 favorites]
You will not get a perfect credit score. That goal is basically unachievable, but 730-740 is very achievable with a bit of finagling. Financial forums are great for getting more information about this; there are people (like me) that pursue higher scores for their own curiosity.
You actually have to carry a balance on credit cards to establish a credit history.
That is absolutely not true and is disproven by a quick Google search. I've never carried a balance on my credit cards and have a quite good credit score.
To fix #1, have much more credit than you use. What matters is your utilization - using $1,000/month of $20,000 credit looks better than using $1,000/month of $1,500 credit.
You can fix #2 by maintaining a mortgage or car loan, but I doubt that's worth your effort. I have never had a mortgage/car loan.
Numbers #3 and #4 are fixed by time - hard credit inquiries drop off your score in two years. That said, keep in mind that the credit reports I've seen always report a three or four reasons for your credit score even if there is really only one "big" reason. "Too many inquiries" always shows up on my credit report even if I have zero inquiries!
If you don't need credit, who cares about the score?
The chance that the OP will never need credit again is very low. If, for instance, the OP ever needs a mortgage again, a 700-ish credit score could have an APR 0.5% or so higher than a 740-ish credit score. Over the course of a mortgage, that can add up to significant money.
posted by saeculorum at 9:03 AM on July 17, 2013 [3 favorites]
You actually have to carry a balance on credit cards to establish a credit history.
That is absolutely not true and is disproven by a quick Google search. I've never carried a balance on my credit cards and have a quite good credit score.
To fix #1, have much more credit than you use. What matters is your utilization - using $1,000/month of $20,000 credit looks better than using $1,000/month of $1,500 credit.
You can fix #2 by maintaining a mortgage or car loan, but I doubt that's worth your effort. I have never had a mortgage/car loan.
Numbers #3 and #4 are fixed by time - hard credit inquiries drop off your score in two years. That said, keep in mind that the credit reports I've seen always report a three or four reasons for your credit score even if there is really only one "big" reason. "Too many inquiries" always shows up on my credit report even if I have zero inquiries!
If you don't need credit, who cares about the score?
The chance that the OP will never need credit again is very low. If, for instance, the OP ever needs a mortgage again, a 700-ish credit score could have an APR 0.5% or so higher than a 740-ish credit score. Over the course of a mortgage, that can add up to significant money.
posted by saeculorum at 9:03 AM on July 17, 2013 [3 favorites]
That line about having to carry a balance to establish credit history is false and an urban legend at this point. Also, 695 is totally fine- it won't stop you from getting any more credit.
If you look at creditkarma (kind of a scummy site, but I think you can get the information without having to sign up for an account). Basically it boils down to your points:
#1) You want to aim for about 10-20% utilization on your credit cards. Higher, and you look like a high-risk user.
#2) If you've paid off your mortgage and car loans, you don't have any recent installments other than your credit card, so they don't "know" you're a reliable customer
#3) You're in your early 30s, so your average account age probably isn't that high. Plus, if you've closed out older accounts, your account age goes down. This is one reason people don't recommend closing out accounts as long as you're not tempted to use them and make sure that they're not being fraudulently used.
#4) You should investigate this. You should be able to get a list of all the hard credit inquiries made on your account through annualcreditreport.com. It honestly may just be that this credit card application counts as one, which is enough for them to ding you like 5 points. But that's why it's #4 on the list- it's low impact. If you do see suspicious inquiries, then you will need to find out what happened.
posted by thewumpusisdead at 9:04 AM on July 17, 2013 [3 favorites]
If you look at creditkarma (kind of a scummy site, but I think you can get the information without having to sign up for an account). Basically it boils down to your points:
#1) You want to aim for about 10-20% utilization on your credit cards. Higher, and you look like a high-risk user.
#2) If you've paid off your mortgage and car loans, you don't have any recent installments other than your credit card, so they don't "know" you're a reliable customer
#3) You're in your early 30s, so your average account age probably isn't that high. Plus, if you've closed out older accounts, your account age goes down. This is one reason people don't recommend closing out accounts as long as you're not tempted to use them and make sure that they're not being fraudulently used.
#4) You should investigate this. You should be able to get a list of all the hard credit inquiries made on your account through annualcreditreport.com. It honestly may just be that this credit card application counts as one, which is enough for them to ding you like 5 points. But that's why it's #4 on the list- it's low impact. If you do see suspicious inquiries, then you will need to find out what happened.
posted by thewumpusisdead at 9:04 AM on July 17, 2013 [3 favorites]
I agree that if you're not looking to get a mortgage or finance something in the near future, your credit score is less important. (Though, apparently some insurance companies or even employers now look at credit scores, so they may affect you even if you're not looking for credit.)
It sounds ultimately like you have a "thin file" - a paid off mortgage loan, a paid off car loan, an existing credit card and now a new credit card. I use creditkarma (mentioned by thewumpusisdead, above) and I believe it has said that people with "A" credit scores (I think they define that as 750+) have 22 or more credit accounts (mix of revolving and installment). The fewer accounts you have, the greater impact any one factor will have on your score. [If you want to use creditkarma, note that it won't count as a "hard hit" on your credit, but that the score it gives you is not a FICO score and, in my experience, it tends to be a bit higher than your FICO score, but there is a correlation between the scoring.]
For #1, one of the factors that is used in the credit score is the proportion of credit you're using to available credit. So, if you're charging $6000 a month and your limit is $10,000, you're using 60% even if you pay it in full every month. [Note, I've never carried a balance and have a very high credit score. It is a long-standing myth that you need to carry a balance to improve your score - see ] This could be solved by (i) charging less or, if you prefer to charge (rewards points, etc.), (ii) getting another card and splitting your purchases (i.e., use 30% of each card's credit each month. Alternately, you could ask your current card(s) to increase your limit. As a data point I have 4 cards, and use less than 10% of my credit on each every month.
I agree with the comments above, in part, that FICO is a bit of a racket because your paid off mortgage and car may not help much because they are far in the past (#2). Also, even if they are on your report, having "only" two (or so) installation loans is somewhat low. For example, due to my student loans (two loans a year for two degrees, some of which were consolidated into new loans) I have something like 20 installment loans (all of which have been paid on time) over the last 10 years. Many of them are paid off, but two are still on my report, and they show a length of reliable payment history.
For #3, one of the factors for credit score is also the average age of accounts (which is why the advice is to try to keep your old accounts open). Thus, opening a new credit card to get more available credit is a double-edged sword - it helps with point #1 but hurts the average age. There is little you can do about this except keep your cards open.
I think #4 may be simply the new card - again, you have a thin credit file so one hard inquiry is an anomaly. I've looked at my credit score before/after a hard inquiry and the difference is usually about 5 points, and it often rebounds in a few months because of the increased available credit. Of course, I regularly check my credit report (for free at annualcreditreport.com) for any irregularities.
posted by Bailey270 at 9:13 AM on July 17, 2013
It sounds ultimately like you have a "thin file" - a paid off mortgage loan, a paid off car loan, an existing credit card and now a new credit card. I use creditkarma (mentioned by thewumpusisdead, above) and I believe it has said that people with "A" credit scores (I think they define that as 750+) have 22 or more credit accounts (mix of revolving and installment). The fewer accounts you have, the greater impact any one factor will have on your score. [If you want to use creditkarma, note that it won't count as a "hard hit" on your credit, but that the score it gives you is not a FICO score and, in my experience, it tends to be a bit higher than your FICO score, but there is a correlation between the scoring.]
For #1, one of the factors that is used in the credit score is the proportion of credit you're using to available credit. So, if you're charging $6000 a month and your limit is $10,000, you're using 60% even if you pay it in full every month. [Note, I've never carried a balance and have a very high credit score. It is a long-standing myth that you need to carry a balance to improve your score - see ] This could be solved by (i) charging less or, if you prefer to charge (rewards points, etc.), (ii) getting another card and splitting your purchases (i.e., use 30% of each card's credit each month. Alternately, you could ask your current card(s) to increase your limit. As a data point I have 4 cards, and use less than 10% of my credit on each every month.
I agree with the comments above, in part, that FICO is a bit of a racket because your paid off mortgage and car may not help much because they are far in the past (#2). Also, even if they are on your report, having "only" two (or so) installation loans is somewhat low. For example, due to my student loans (two loans a year for two degrees, some of which were consolidated into new loans) I have something like 20 installment loans (all of which have been paid on time) over the last 10 years. Many of them are paid off, but two are still on my report, and they show a length of reliable payment history.
For #3, one of the factors for credit score is also the average age of accounts (which is why the advice is to try to keep your old accounts open). Thus, opening a new credit card to get more available credit is a double-edged sword - it helps with point #1 but hurts the average age. There is little you can do about this except keep your cards open.
I think #4 may be simply the new card - again, you have a thin credit file so one hard inquiry is an anomaly. I've looked at my credit score before/after a hard inquiry and the difference is usually about 5 points, and it often rebounds in a few months because of the increased available credit. Of course, I regularly check my credit report (for free at annualcreditreport.com) for any irregularities.
posted by Bailey270 at 9:13 AM on July 17, 2013
When is the last time you pulled your full report? Please do that ASAP. Reading this, it seems very possible that your identity has been stolen. #1 shows up when you're carrying a lot of balances - like if you have a card for $5,000, a card for $10,000, and a card for $2,000, and you're carrying a $4,000, $9,000, and $1,500 balance on each, respectively. Get a report from all three of the major services (Experian, TransUnion, Equifax) and go through each with a fine-toothed comb. If you see any accounts that don't belong to you, addresses you've never lived at, etc, take action.
I don't mean to be alarmist, but you're better safe than sorry.
posted by sevensnowflakes at 9:14 AM on July 17, 2013
I don't mean to be alarmist, but you're better safe than sorry.
posted by sevensnowflakes at 9:14 AM on July 17, 2013
Ah, crud, on re-read I see you have recently pulled your full report. (And also that I used the word "is" when I should have used the word "was"!) Still, if you pulled the report more than 6 months ago, I'd do it again, and if you only got one from a single agency, pull the others as well.
posted by sevensnowflakes at 9:26 AM on July 17, 2013
posted by sevensnowflakes at 9:26 AM on July 17, 2013
What exact steps should I follow to get a perfect credit score?
I don't think you can. Credit scores don't work that way, as there's a fairly significant degree of fudge factor involved in the assignation of any particular score. Note that I said "assignation" not "computation," because it's not a matter of plugging in your numbers into an algorithm. The CRAs each have proprietary methods for coming up with their scores, and they're based at least in part on subjective underwriting factors.
posted by valkyryn at 9:35 AM on July 17, 2013
I don't think you can. Credit scores don't work that way, as there's a fairly significant degree of fudge factor involved in the assignation of any particular score. Note that I said "assignation" not "computation," because it's not a matter of plugging in your numbers into an algorithm. The CRAs each have proprietary methods for coming up with their scores, and they're based at least in part on subjective underwriting factors.
posted by valkyryn at 9:35 AM on July 17, 2013
If you don't need credit, who cares about the score?
Unfortunately, credit scores are taking on more and more importance. I found that my SO and I could not rent an apartment together when we moved to my most recent town without having credit reports run on both of us with every application. Employers are also now pulling credit scores, especially for jobs involving money handling or other access to valuables. It's disgusting, but the system as it is has you over a barrel, and a credit score does mean something to certain important audiences, even if you don't want to buy consumer goods.
You might also be interested in this MetaTalk thread.
posted by Miko at 10:01 AM on July 17, 2013 [1 favorite]
Unfortunately, credit scores are taking on more and more importance. I found that my SO and I could not rent an apartment together when we moved to my most recent town without having credit reports run on both of us with every application. Employers are also now pulling credit scores, especially for jobs involving money handling or other access to valuables. It's disgusting, but the system as it is has you over a barrel, and a credit score does mean something to certain important audiences, even if you don't want to buy consumer goods.
You might also be interested in this MetaTalk thread.
posted by Miko at 10:01 AM on July 17, 2013 [1 favorite]
Some tips for a very good if not perfect score --
1. Open a few accounts, not zillions, and do some business on them. Pay them off in full each month.
2. Take out a loan for something like a car or home improvement and pay it off timely.
3. Be patient. The inquiries to secure the accounts and debt always ding your score. But a few years of stable credit activity and timely payments should get you to 750 without any problem at all.
posted by bearwife at 10:54 AM on July 17, 2013
1. Open a few accounts, not zillions, and do some business on them. Pay them off in full each month.
2. Take out a loan for something like a car or home improvement and pay it off timely.
3. Be patient. The inquiries to secure the accounts and debt always ding your score. But a few years of stable credit activity and timely payments should get you to 750 without any problem at all.
posted by bearwife at 10:54 AM on July 17, 2013
3 open tradelines, used regularly, which are all over a year old. Zero late payments. 740 or higher, for all intents and purposes, is the same as the Holy Grail of the 850 score. Don't sweat it.
posted by brownrd at 10:59 AM on July 17, 2013
posted by brownrd at 10:59 AM on July 17, 2013
I'm not at all an expert on credit, but I do have a FICO score that is near the highest possible. I don't have 22+ open accounts like Bailey270 said is necessary. The things I do have that are different from you are 1) some very old accounts, like a credit card that I've had for 20+ years, 2) high credit limits on my small number of credit cards so I rarely use more than a small fraction of my available credit, and 3) a current mortgage.
You could easily go for higher credit limits, if you call the holder of your current credit card they likely will be very happy to raise your limit.
Perhaps something to look into would be to get a home equity line of credit (that you don't actually have to draw money from) so that you have an open loan account to show up on your history. Note that I don't know for sure if this will improve your credit score, you would need to look into this with people who actually know something. A HELOC can also be good as a backup emergency fund as I recently wrote. (Apparently I'm all about recommending HELOCs these days.)
posted by medusa at 12:16 PM on July 17, 2013
You could easily go for higher credit limits, if you call the holder of your current credit card they likely will be very happy to raise your limit.
Perhaps something to look into would be to get a home equity line of credit (that you don't actually have to draw money from) so that you have an open loan account to show up on your history. Note that I don't know for sure if this will improve your credit score, you would need to look into this with people who actually know something. A HELOC can also be good as a backup emergency fund as I recently wrote. (Apparently I'm all about recommending HELOCs these days.)
posted by medusa at 12:16 PM on July 17, 2013
The score is a means to an end. As long as you are getting good rates when you need credit, that's all that matters. 695 is fine.
posted by gjc at 2:11 PM on July 17, 2013
posted by gjc at 2:11 PM on July 17, 2013
A rule of thumb for revolving accounts, relevant to their reason #1, is to try to keep utilization under 30% of your credit limit. If your monthly balance (not your month-to-month carryover, which I assume is $0) is routinely going over that, then either requesting a higher limit or opening more accounts and spreading your expenditures over them might help improve your record on that front. You definitely _don't_ need to carry a balance, though.
695 _does_ seem a bit low for someone with significant history of responsible utilization of credit. Not down into "something's terribly wrong here" territory, but suggestive that somehow there's a behavior, even a sensible-seeming one, that's negatively impacting you.
posted by jackbishop at 2:37 PM on July 17, 2013
695 _does_ seem a bit low for someone with significant history of responsible utilization of credit. Not down into "something's terribly wrong here" territory, but suggestive that somehow there's a behavior, even a sensible-seeming one, that's negatively impacting you.
posted by jackbishop at 2:37 PM on July 17, 2013
I got a score in the low 800s by having a credit card with a very low limit ($200) which charged me about $10/mo for the privilege of having it and something like 29% interest. The first year I had it, I used it occasionally for stuff like starbucks and quickly decided to never ever use it. After about 18 months of this my score went from mid 600s to low 800s.
Now I have a regular card with a fairly high limit, and on average I spend about 50% of that limit per month. I always pay the bill in full (on time and with a single payment) as I don't like the idea of carrying a balance, yet my score is now about 70 points lower.
in conclusion credit scores are fucking bullshit and unless you plan to get a mortgage some time in the next 2-3 years, don't worry too much about it.
posted by elizardbits at 3:16 PM on July 17, 2013 [1 favorite]
Now I have a regular card with a fairly high limit, and on average I spend about 50% of that limit per month. I always pay the bill in full (on time and with a single payment) as I don't like the idea of carrying a balance, yet my score is now about 70 points lower.
in conclusion credit scores are fucking bullshit and unless you plan to get a mortgage some time in the next 2-3 years, don't worry too much about it.
posted by elizardbits at 3:16 PM on July 17, 2013 [1 favorite]
We sometimes make major-ish purchases on a Sears (or whatever) card when they are running a special of 0% interest for a year. It helps keep everything active.
Chase sends us (for a card we never use but keep for emergencies) 0% balance transfer checks constantly. We would use those for a purchase we didn't want to make at Sears.
695 is a little low, honestly, for where you are. I have had 2 major house-related delinquencies in the last 2.5 years, my score is at or above that on all 3 bureaus. I think that #1 is a really big chunk of the formula.
posted by getawaysticks at 10:22 AM on July 18, 2013
Chase sends us (for a card we never use but keep for emergencies) 0% balance transfer checks constantly. We would use those for a purchase we didn't want to make at Sears.
695 is a little low, honestly, for where you are. I have had 2 major house-related delinquencies in the last 2.5 years, my score is at or above that on all 3 bureaus. I think that #1 is a really big chunk of the formula.
posted by getawaysticks at 10:22 AM on July 18, 2013
This thread is closed to new comments.
posted by Kimberly at 8:50 AM on July 17, 2013 [3 favorites]