Is It Possible To Get A Perfect Credit Score?
While some of us may like to pretend credit doesn’t exist in today’s world, the unfortunate fact of the matter is that you simply cannot get anywhere without it. All of the milestone purchases anybody trying to build a life for themselves is likely to make require borrowing money, unless you’re one of the privileged few who can afford to save up enough to buy the car, the television, or the house upfront (and if you are, then we’re sorry to say it but this article probably isn’t for you).
It’s a given that in any human population, values are distributed according to a bell curve. That holds true for height, for IQ scores, for age groups, and even for credit scores, too. There are bound to be plenty of us who are proud of our credit scores, just like there are plenty of us whose credit scores aren’t quite where we’d like them to be. This can happen as a result of a number of different causes.
Why Your Credit Might Tank
Unprecedented natural disasters could cause stocks you’ve bought to plummet, just like an identity thief could steal your details and make dozens of fraudulent purchases that can take years to sort out. We’ll be honest: sometimes, our credit scores tank because we haven’t been behaving quite as responsibly, financially speaking, as we should have been. Nobody’s perfect, and we’re all prone to making mistakes—after all, that’s the only way we learn anything, from learning to count to figuring out how to tie your shoes and, yes, all the way to cracking the code of what it means to build a healthy financial existence for yourself and your family.
What happens if your score is suboptimal, however? The interest rates you’ll be offered on loans with a bad credit score are not likely to be of very much help to you, or to any of your loved ones, at all. The riskier you are as somebody to lend money to, the higher the interest rates need to be in order to offset that risk for the person lending you money in the first place. This is effectively all the credit score represents: how reliable you are, speaking in the most precise of mathematical terms, to pay back the money that the lender offers you. It’s a manner of empirically quantifying good faith, is one way to phrase it.
What Is Credit Repair?
Credit repair is the name given to a series of techniques that can be employed in order to rescue a credit score that’s not quite as high as it needs to be. If you need to be practicing credit repair, odds are you’re already aware of this. After all, reminders have been arriving in your mailbox four times a year. It’s difficult to avoid. While we could all benefit from learning what it is that makes up a good credit repair strategy, not all of us are in sufficiently dire straits to need to practice them right away.
If you are, however, engaged in the process of performing credit repair on your ailing figure, it makes sense that you need some sort of goal to aim at. This is as true for credit repair techniques as it is for any area in which humans attempt to track their achievement. To that end, it’s simply logical to try and figure out what it is that constitutes a perfect credit score. Like they say, shoot for the stars and you might just land on the moon.
But try googling about any of this kind of stuff and you’re likely to become rapidly overwhelmed with the sheer volume of information on offer. It can take an awfully long time to even figure out what the different categories of buyers are, according to ranges of credit scores. Credit repair has the potential to carry you and your three-digit number all the way to the top of the food chain, but it’s not always straightforward to try and figure out how exactly one might go about doing this.
To that end, we’ve decided to put together an article discussing the topic of credit scores, and how achievable they are for regular people who may or may not be currently in the process of practicing credit repair. We’ll do our best to take at look at the problem objectively, and hopefully by the end of this piece you’ll have a better idea of what it is to have a perfect credit score, as well as the necessary information you’ll need in order to design your own credit repair strategy.
With that being said, let’s get straight into it. Is there such a thing as a perfect credit score? And if there is, is it possible to achieve it?
How To Get A Perfect Credit Score (By Using Credit Repair)
The answer to the first question is reassuringly simple, especially given the jargon-heavy world in which most of this information is located, on the internet at least. There is, indeed, a perfect credit score. To understand what it is, and why that figure is so important, we’ll need to take a brief look at how credit is calculated, and the different ranges the scores are categorised into, at least in the minds of the people who are going to be lending you money—and really, those are the only minds that matter in this particular situation, whether you’re trying to get to grips with credit repair or not.
You can track your credit score by making use of consumer credit reports. These are generated by the three main credit bureaus, which are TransUnion, Experian, and Equifax. You’re entitled to one free report from each of them per year, so it’s a good idea to stagger them to arrive every four months, in order to give yourself the best possible overview of how your credit is performing (and if your credit repair is working) across the entire year.
When it comes to the actual score, however, you have more than one. As a matter of fact, you have tons. There are as many different scoring models around as there are different scores, and each model has been painstakingly calculated by actuaries employed by various giant multinational firms. For the sake of this article, though, we’ll just be considering the FICO credit score, which is the most well-known, and discussing the various ranges into which those scores can fall.
Broadly speaking, there are five categories of credit score, all of which encompass a range of scores. While each lender sets their own cutoff for what makes an ‘Excellent’ score, or a ‘Fair’ one, there are, generally, a few rules of thumb we can keep in mind.
Credit Score Ranges
A score between 750 and 850 is likely to be classed as Excellent by most lenders. 700 to 749 will qualify you for a Good rating, while Fair stretches from 650 to 699, Poor from 550 to 649, and Bad takes into account any score of 549 and below.
The reason these ratings are important is the deals you’re likely to be offered by whichever lending service you’re making use of is going to vary wildly depending on how they categorise you. The very best deals will be offered to those with Excellent credit ratings, while people with Poor and Bad credit ratings (prior to performing credit repair, of course) will be offered significantly worse deals.
A perfect score is 850, but it’s worth noting that a perfect score on the FICO scale will necessarily not be the same as on another scoring scale, and vice versa. This is because they are all calculated using slightly different formulas: it’s like comparing Fahrenheit and Celsius. They all measure the same thing, but they all use markedly different systems for arriving at the figures in question.
Credit scores aren’t set in stone, either. Thankfully, for those of us who are currently engaged in credit repair plans, all credit scores change over time. This applies to perfect scores just as much as it applies to sub-optimal scores. It’s perfectly possible to hit the 850 perfect score, but not stay there for very long. Even if nothing happens during the passage of a month, you may well see your score change.
This isn’t anything to be alarmed by, and can be explained by the simple realisation that these scores are calculated using a rolling period of your credit history, so the difference in number could be accounted for by some of your older transactions being wiped off the record, or some new ones being more recently factored into the equations.
It’s possible to get a perfect 850. While it’s not easy, it doesn’t take magic, either. The first thing you need to get under your belt in order to start climbing towards that coveted peak is the way your scores are calculated. Since we’re using the FICO credit score, here are the factors they take into account while they work out what your exact credit score is:
- The types of credit you use
- Your payment history
- Your debt to credit ratio (also called credit utilization)
- Age of your credit history
While FICO won’t release their exact formula (because that would make it too easy for people to game the system, which wouldn’t be good for anybody and could in fact spell the complete breakdown of the entire network), we know for a fact that your payment history has the most impact on the resultant score: it’s the most heavily weighted factor in the overall computation.
How, then, do you actually go about climbing the ladder?
Credit Boosting Strategies
The techniques you need to elevate your credit score from Good to Excellent are the same ones you’ll need to perform credit repair on a sub-par score.
The most important tip of all is to make a habit of paying your bills on time. No matter how trivial they may seem, repeated history of being absolutely reliable when it comes to financial obligations you’ve taken on is the single best way to nudge your score upwards.
Another good strategy is to change up the kind of credit you’re using. Student loans, car loans, and credit cards are just three different kinds of credit. If you can prove you’re reliable across the board, this will work wonders on your overall score because it shows without a shadow of doubt that you’re reliable in a range of different arenas.
Finally, try to get going with credit as soon as possible. The longer you can spend building up a history of good credit, the better your score will be. If you can get a credit card in your early 20s and use it responsibly, by the time you’re ready to make a serious purchase you’ll already have a score others would dream of.
There you have it: the mystery of the perfect credit score, made plain and simple. We hope you enjoyed this article, and don’t forget that here at OttawaBadCreditCarLoans.ca, we consider every application for an automobile loan that we receive. Don’t worry about how great or how bad your score may be: just give us a call and help us to help you out of the situation you’re currently in.