What To Do To Have a Perfect (or Near-Perfect) Credit Score – Part II
In our last article, we had an overview of what a great credit score is and what its main benefits are. We also discussed that it is not impossible even for people holding personal loans to achieve this kind of credit score number.
This time, let’s keep looking especially at what you can do to increase your credit score substantially and get it to perfect or near-perfect levels in a few years.
One of the most glaring mistakes people who strive for a better credit score makes is to gauge their credit using free, online scoring tools, such as the one on CreditSesame.com or the simulator on Bankrate.com. If you want to gauge your real credit score standing, then the only reliable option out there is MyFico.com, which will show you your real FICO score (the one used by personal loan lenders). There are other important tools of course, like signing up for Score Watch, a website that monitors credit for $14.95 a month. This services provides customers with two Equifax credit reports that both include information with a lot of detail on what factors might be hurting or helping their customers’ credit score.
What if I Have a Bad Credit Score?
Even if your credit situation is not the best due to a personal loan or other reason, you shouldn’t think that you can not enjoy from a perfect credit score. In fact, there are people who have had their credit score severely damaged (even by unpaid personal loans, bankruptcy or foreclosure) and have achieved credit score numbers superior to 800 with time and hard work.
For example, a software engineer in Chicago had several financial issues during the course of his life. While in college, he used only a debit card, so on top of everything he didn’t manage to establish a good credit. Then, after graduate school he also realized he failed to pay both a utility bill and a small personal loan. This affected his credit score negatively, which he regretted when he wanted to buy a house later in life. During this period, several mortgage lenders declined him due to his very low credit score of around 540.
In order to revert things, the engineer bought a car acquiring a personal loan for cars and then also opened new credit cards for him to use. What he did then is to focus all his spending on the new credit cards and on always repaying at least half of each card’s balance every month. This allowed him to maintain a good ratio. Even better: After maintaining this behavior for 18 months, our friend’s efforts finally paid off: His FICO score increased to almost 760.
However, don’t think that just because you can manage to achieve a credit score of above 700 relatively fast you will immediately qualify better interest rates. In fact, studies show that in order to benefit from better interest rates on personal loans or other financial perks a credit score of at least 740 is needed. This will allow you to qualify for the best and lowest credit card interest, auto loans, personal loans and home mortgages.
This implies that striving for a perfect credit score might not be that necessary after all. In fact, it seem that once above the score of 770 or more, you might already apply for the most important credit score benefits on any personal loan and more. So, if you manage to achieve this credit score, you should shift your strategy from score improvement to maintenance.
If however, during your financial life you manage to get your credit score above 800, just be proud of it, get all the perks on personal loan interest rates if you want and then focus on maintaining that score.