We all want to be perfect at something: a sport, a skill, a trick. But when it comes to your credit, there’s only so much you can do to get to that top score of 850. There are factors that may work against you that you don’t have the ability to change—like how long you’ve had your accounts, for one.
In this video, we show you what parts of your credit score you can control and which you shouldn’t worry too much about. You still get top financial marks without a nothing-but-net “perfect” score.
The biggest parts of your score are your payment history and your credit utilization. Together, they contribute to more than half of your score.
Paying your bills on time each month? You’re doing great—don’t change a thing.
Managing your credit utilization can be tricky. You’re judged based on how much of your available credit you’re using each month. If you have a credit limit of $10,000 and you have a balance of $1,000, that’s no big deal. This part of your score will reflect your fairly responsible spending habits. But if your balance for that $10,000 limit is $9,800, your credit utilization ratio—and in turn, your entire credit score—is not going to be stellar.
The other three components of your credit score only count for 35% of your total score, and they can be harder to control. Those three are new credit accounts, length of credit history, and credit mix. If you’re a young or new credit user or don’t have a lot of accounts, you’re missing out on points in these categories. It’s not your fault; it’s just how the game is played.
Above all else, focus on your payment record and how much of your credit you’re using. It’s more important to keep tabs on what’s happening in your credit report and build smart money habits than it is to fret about that magic number. Remember, you can’t play in the big game until you put in plenty of practice.
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February 11, 2020 at 12:30AM
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How to Get a Near-Perfect Credit Score - Lifehacker Australia
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