How I got to a perfect credit score of 850

Earning a perfect 850 FICO credit score isn’t easy, but after years of good credit, personal finance coach Lynnette Khalfani-Cox made it happen in 2021.

A perfect score is rare: only 1.6% of Americans have one, according to FICO. And for Khalfani-Cox, The Money Coach and author of “Zero Debt: The Ultimate Guide to Financial Freedom,” getting a perfect score wasn’t necessarily a specific goal.

Previously, his score was “in the high 800s.” And she was fine with that, since any FICO score of 800 or higher is considered “exceptional” by all three major credit bureaus. Even without a perfect score, any borrower with exceptional status qualifies for loans and credit cards at the lowest interest rates possible.

However, receiving an email alert in 2021 about his perfect score was an incredible milestone for Khalfani-Cox, who has written about his previous experiences with debt management, when his credit score was in the 400s.

While achieving a perfect score can take some time and a mix of different types of loans, Khalfani-Cox says the following steps helped her get there.

1. Pay all your bills on time

One of the easiest ways to increase your credit is to simply never stop paying.

The bulk of your FICO credit score, 35%, is based on how often you make your minimum debt payments on time, whether it’s for a credit card, personal loan, or auto financing.

A late payment can’t be reported to credit reporting agencies until it’s at least 30 days late, but a 30-day late payment can lower a very good or exceptional score by 63 to 83 points, according to FICO data. It can also stay on your credit report for up to seven years.

2. Avoid excessive credit inquiries

“Don’t apply for credit unless you really need it, because you don’t want to have a bunch of inquiries that are unnecessarily lowering your credit score,” says Khalfani-Cox. This is especially true if you plan to apply for a large loan soon, such as a mortgage.

An inquiry is a request to check your credit history, made with your consent, usually as part of a loan or credit card application.

These requests are often called “hard inquiries” or “hard pulls” of your credit history. They can negatively impact your FICO score for up to a year, as excessive applications for new credit can be a red flag about your trustworthiness as a borrower.

3. Minimize the amount of debt you have

The amount of credit you have available compared to the amount you actually use is known as your credit utilization ratio and represents 30% of your credit score. The more credit you have available, the higher your credit score. Experts generally recommend keeping your utilization rate below 10%.

“A turning point in my desire to monitor and improve my credit score occurred after I started getting out of debt,” says Khalfani-Cox. At an earlier point in her life, she had a $100,000 debt that took three years to pay off.

“My credit score went up like 100 points after I finally paid off my credit card bills. That’s when I noticed the really strong link between how I’m handling the debt side of the equation, specifically bills credit card, and my credit score,” she says.

4. Have an extensive credit history

The length of your credit history accounts for 15% of your score. In general, the longer a loan or credit card has been active, the better it is for your credit score. Because of this, closing an account may temporarily affect your credit score by a few points.

This happened to Khalfani-Cox shortly after he achieved a perfect credit score. He had just paid off a home loan, and his score subsequently dropped seven points, from 850 to 843.

Having a long credit history may not be possible for younger borrowers, but they can begin to build it up by leaving their oldest account open.

5. Have a good credit mix

Representing 10% of your credit score, having a mix of different types of credit accounts, including home loans, installment loans, and revolving loans like credit cards, will improve your score. Khalfani-Cox had a good mix of loans, including multiple mortgages, which improved her credit score.

“When you show that you can juggle all those types of loans responsibly, you get extra points for that,” says Khalfani-Cox.

Of course, you probably shouldn’t sign up for a mortgage or personal loan just to get a perfect score. But it’s a factor to consider when you think about how your credit score is calculated.

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