The credit score is many things, a marker of success, a burden, a status symbol and extremely confusing. So much so, that getting a really high credit score can be a challenge to most. Your credit score is a window into your financial soul that tells creditors if they stand a high chance of losing money on your, or if you’re good for the interest and the principal payments. However there is one tier of borrowers that seem to tower over the rest, and those are the people with the mythical credit score of 800+. Now I myself barely fall into this illustrious group (like by a point or two) but I do fall into it. Which in my opinion allows me to give some basic advice on how to get there and to be fair there are credit situations are so F.U.B.A.R. that they can’t be help, there are a lot of steps that most people can take in order to level up in the financial world and get that “Excellent” credit rating.
1. Use credit cards: Now Dave Ramsey if you’re reading this, take a deep breathe and hear me out on this. In order to have good credit you have to show that you can use it responsibly. This means opening up a credit card that has, no annual fee and a good cash back program. This way you can earn 2 to 3 percent and come out ahead because you’re not having to pay an annual fee in order to use the card. The problem, in my opinion, with extremely good rewards cards is that the annual fees usually require a person to run up a lot of purchases to make up the difference, thus lowering the potential gains to your credit score.
2. Don’t go anywhere near your credit limit: This is a key step to do. The main reason I personally have a high credit score is because I am usually under 8% of my limit on each individual card that I own. This shows lenders that I am capable of having the temptation of a high credit limit but the willingness and discipline to stay well under the credit limit for any of my cards.
3. Have multiple credit cards: Now if Dave Ramsey isn’t mad yet, he will be. I am 100% sure that having multiple credit cards flies the face of everything Dave talks about, but we are advanced financial consumers here trying to max out our credit score. In my personal experience this is the one thing that hurts most credit scores. As counter intuitive as it may seem lenders like to see a lot of streams of credit as long as they are responsibly managed.
4. Pay the balance off in full every month: Having zero late payments in the last 7 years will up your score tremendously. Obviously having a long history of paying off credit on time will show lenders that your a responsible borrower. However one thing that you don’t want to do is paying off credit cards before the balance shows up on the statement. A lot of credit cards allow for payment to be made on transactions that haven’t shown up on your statement, which may seem good, but not having a balance will hurt your credit because the balance won’t register on your credit report. In order to show that you can manage credit you need to actually have credit.
In conclusion building an 800 plus credit score is entirely possible for nearly all people and in fact it can be quite easy if given enough time. If you start to use credit cards responsibly and management credit limits you’ll have that vaunted credit score in no time. Of course having an 800 plus credit score is great an all but paying cash for everything could be better. The key is to not change your spending habits from when you were using cash or a debit card.