Are you looking to join the ranks of individuals with excellent credit scores? While an 800 credit score isn’t the top rating, it’s only 50 points shy of having a perfect score, and you’ll likely qualify for the best terms on credit card and loan products. And with the right actions and time, it’s possible to get there.
What Is a Credit Score?
A credit score is a three-digit number that financial institutions and other creditors review to gauge your creditworthiness. A higher credit score can help you access more loans and receive lower rates. Landlords and utility companies are some of the other entities that look at your credit score as part of assessing your ability to make on-time payments.
Factors Influencing Credit Scores
Five key factors determine your FICO score. They are outlined below.
Payment History
Importance of On-Time Payments
Your payment history makes up 35% of your FICO score and is the most important category. It reveals to lenders that you can stay on top of monthly payments, which can result in low interest rates for your loans.
Strategies for Timely Payments
Automatic payments, spending less than you earn, and prioritizing a $0 balance on your credit card at the end of each billing cycle can help you make timely payments. It comes down to making good financial decisions and picking up a side hustle if you need extra cash to stay on top of your bills.
Managing Late Payments and Their Impact
It’s essential to keep late payments to a minimum, as each late payment will drag down your credit score. Making too many late payments can make you ineligible for important financial products, such as traditional mortgages.
Credit Utilization
What is Credit Utilization
Credit utilization makes up 30% of your FICO score. It measures the percentage of your credit limit that you have borrowed against. If you have a $1,000 credit line and have borrowed $300 against it, you have a 30% credit utilization ratio.
Ideal Credit Utilization Ratio
A 30% credit utilization ratio can improve your score, but it is optimal to get this number below 10% for maximum growth.
Techniques to Lower Credit Utilization
Paying your credit card balance faster, initiating a balance transfer to save on interest, and picking up a side hustle to make higher monthly payments can result in a lower credit utilization ratio. You should not stop with the minimum monthly payment. It’s important to continue paying off your debt.
Length of Credit History
Why Length of Credit History Matters
The length of your credit history makes up 15% of your total score. A lengthy history demonstrates that you have navigated financial obstacles and paid your bills on time for several years.
How to Length Credit History Effectively
Opening credit accounts and keeping them active will increase the length of your credit history. Consumers have to let time take its course while working on other areas to improve their credit scores.
Impact of Closing Old Accounts
Closing old accounts can reduce the average age of your credit accounts and have a negative impact on your score. You will also have a higher credit utilization ratio after closing an old account, which is unfavorable.
Types of Credit Accounts
Importance of a Diverse Credit Portfolio
Credit mix makes up 10% of your credit score and reflects your ability to juggle multiple types of debt. Creditors may feel more confident working with you if you have a good credit mix, but you should not incur more debt just for the sake of having a good credit mix.
Types of Credit Accounts to Maintain
Credit cards, mortgages, auto loans, HELOCs, and personal loans are some of the types of credit accounts that you may have to maintain over your lifetime.
Managing Different Credit Accounts Responsibly
It’s important to make on-time payments for each of your credit accounts to demonstrate that you can handle additional debt. Keeping your discretionary expenses low and growing in your career will make it easier to pay off debt and manage new accounts.
New Credit Inquiries
Understanding Hard vs. Soft Inquiries
New credit makes up 10% of your credit score. If you apply for too many credit accounts, lenders may see you as desperate to access more capital. Soft credit inquiries will not have any impact on your credit score, but a hard credit check will reduce your score by a few points.
It’s okay to get a hard credit check for a mortgage or a credit card once in a while, but it shouldn’t be a normal practice.
Minimizing Hard Inquiries
You can reduce the amount of hard credit inquiries you need by paying off existing debt and not relying on debt to fund your lifestyle. If you use debt too much to stay afloat, you may have to cut back on discretionary expenses, downsize in your current area, or move to a more affordable location.
Optimal Strategies for Applying for New Credit
You can apply for any credit accounts that only run soft credit inquiries without any impact on your score. You can also only apply for credit when you need it. If you do all of your hard credit checks within 14 days, all of that activity will only count as one inquiry. You can use this small window to open new credit accounts while minimizing the impact of hard credit checks.
The Benefits of Having an 800 Credit Score
There are several perks to having an 800 credit score:
- Competitive interest rates: Lenders and creditors generally have a minimum credit score requirement. But with an 800 credit rating, you won’t have to worry about if your score is high enough to qualify for financing, assuming you meet the other qualifying criteria.
- Access to better credit card and loan offers: An 800 credit score also opens the door to credit cards with generous rewards programs, cashback offers, and travel perks, just to name a few. Or you may be eligible for a larger loan amount with better terms.
- Reduced insurance premiums: If you live in a state where providers are allowed to assess premiums based on your credit rating, an 800 credit score coupled with a good driving record means you’ll qualify for the best rates.
- Lower deposits: When you apply for a rental, the landlord may require a smaller deposit if you have an 800 credit score. You could also have service provider deposits waived, as the likelihood of default is lower with a score this high.
How Long Does It Take to Build an 800 Credit Score?
It depends on your current score, what’s in your credit report and how committed you are to reaching your goal. If your current score is in the 700s and you take an aggressive approach to reach a higher credit score, you could speed up the process. Still, it could take two years or more to get a score of 800 or higher.
Evaluating Your Current Credit Situation
Knowing where you stand can help you chart out a path for improvement. Here’s how you can determine your current credit situation.
Obtaining Your Credit Report
You can obtain a free copy of your credit report each year from any of the major credit bureaus: Experian, Equifax, and TransUnion.
Understanding Your Credit Report
Your credit report contains your payment history on obligations like auto loans, mortgages, and other financial products. It lists your on-time and late payments, but it also provides additional information about your credit profile, such as information about your balances.
Identifying Areas for Improvement
Reviewing your credit report can result in a high credit score if you look for areas of improvement. This report can help you gauge when you make late payments and can help you correct any mistakes.
How To Increase Your Credit Score to 800
Consider these strategies as you work towards increasing your credit score to 800:
Make On-Time Payments
Payment history is the most significant component of your FICO score, accounting for 35 percent. Once an account reaches 30 or more days past due, the creditor can report the delinquency to the credit bureaus, resulting in a significant drop in your credit score. And if the account is charged off after several months of nonpayment, your score could drop even more.
Past-due accounts with service providers can also mean bad news for your credit score if they become collection accounts.
Late payments, collection accounts and charged-off accounts linger on your credit report for up to seven years. So, it’s pertinent that you pay your outstanding debt obligations and bills on time. Otherwise, you risk hurting your credit score and delaying progress toward meeting your goal of an 800 credit score.
Utilize Balance Transfer Offers
Many credit card issuers offer favorable balance transfer offers when you open a new card. Balance transfer offers make it easier to pay back your credit card debt since interest will not accumulate during the intro APR period. Paying back your credit card balance without worrying about interest can put you in good standing and improve your credit score.
Leverage a Higher Credit Limit
Raising your credit limit will improve your credit utilization ratio, a component that makes up 30% of your score. A higher limit can lead to a good credit score, and you can tap into more funds if you need to borrow money. Some credit card issuers raise your limit every six months so that you can make on-time monthly payments for personal loans and other debt obligations. However, you may also have to ask for an increase in some cases.
Sign Up for a Credit Builder Feature
If your score is on the lower end or you have a minimal credit history, a credit builder feature could help you get one step closer to an 800 credit score.
Monitor Your Credit Score and Reports
It’s challenging to keep tabs on your credit health without credit monitoring. Fortunately, there are ways to access your credit report for free, providing you with accurate credit information and real-time alerts so you can easily detect errors and fraudulent activity.
Credit monitoring also allows you to address credit reporting issues promptly and avoid damage to your score from inaccurate or untimely information.
Lower Your Credit Utilization Below 30%
Credit utilization is the second-largest component of your credit score. It’s determined by the percentage of your credit limit in use. Aim to keep this percentage at or below 30 percent to give yourself the best shot at an excellent credit score – the lower, the better.
For example, assume you have three credit cards with a $500 limit, bringing the total credit limit to $1,500 across the board. If you spend $250 on each card or $750 collectively, your credit utilization ratio will be 50 percent. Ideally, you want to pay down the balances so they equal $450 or lower collectively.
Avoid Hard Inquiries on Your Credit Report
A hard inquiry is generated each time you apply for new credit (i.e., a credit card or loan) and drops your credit score by a few points. Although this may not seem like much, several applications for credit in a brief period could significantly impact your credit score.
The upside is the impact is temporary and only lasts for a few months. Plus, the credit scoring model doesn’t penalize you when shopping around for a car loan or mortgage. Still, you only want to apply for credit as needed while on the road to an 800 credit score.
Leave Old Accounts Open
When you close an old account, you could hurt your average age of credit accounts, which makes up 15 percent of your score. You could also inadvertently increase your credit utilization percentage.
A better idea is to use old accounts once every few months to keep them active. Pay the balance before the statement period ends to avoid interest.
Consolidate Your Debts
A debt consolidation loan can help you pay off debt faster and improve your credit score. It involves taking a loan, preferably with a lower interest rate than you’re currently paying on your credit cards, and using the proceeds to pay off your balances.
In turn, your credit utilization will drop, and your score will likely increase. Even better, you’ll streamline the repayment process, avoid late payments as you’ll only have to pay one creditor instead of several each month and possibly save a bundle in interest.
Address Errors Immediately
If you detect any errors on your credit report, you should dispute them right away. Doing so can add a few extra points to your score, but you must provide proof that an item on your report is inaccurate.
Engaging with The Credit Pros allows you to take proactive steps in managing your credit. Their team of experts will work diligently to address any inaccuracies in your report, helping you understand the dispute process and guiding you every step of the way. With their personalized solutions and commitment to helping you succeed, you can regain control of your financial future. Remember, accurate credit reports are vital for obtaining loans, mortgages, and favorable interest rates.
Don’t let errors on your credit report hinder your financial progress. Reach out to The Credit Pros today by calling (727) 306-8201 or filling out a form for a consultation; no obligation is required.
