In this post, we are going to take a look at what a maximum credit score is. A credit score number is often called a FICO score, for Fair Isaac Corp., the California company that developed the system upon which it is based. Scores range from the 300s to about 900, with the vast majority of folks falling in the 600s and 700s.
The higher the score, the better it is. Scores higher than 725 are considered good, while those below 600 are considered poor. Maximum credit scores that range from 750 to 850 are excellent and show creditworthiness of the individual applying for a loan.
Most people’s reports aren’t perfect. It is rare to see someone with a score over 850 for example. However, your score doesn’t have to be an 850 to get done what you need to get done. And you’re probably reading this post because you’ve made some mistakes in past. No shame here, don’t be embarrassed. What we want is to go from here to get your score back into healthy mode.
Just be thankful you found this blog! The truth is, your maximum credit score can be achieved, but it will take some time. Think about it, you didn’t get your credit score in a mess overnight did you? Didn’t think so 🙂 But getting out of that mess doesn’t have to take as long as you think either 🙂
Maximum Credit Score
Let’s start by taking a look at some things that hinder your score from its maximum potential. Mistakes can be made when entering your information into the system at credit bureaus. Lenders, banks and credit card companies make mistakes too. In fact, over 60% of credit reports contain some inaccuracies or errors.
From my own personal experience, I had 26 items on my credit report that should have never been there. I’m so glad I challenged them, that was an injustice to my report that had to be rectified.
Some people get lucky though, and in some cases, this isn’t always a big deal, depending on the mistakes found. Even with some flaws in your report, you can still be eligible for credit at competitive rates and good terms. The key here though is that you have a long credit history with a lot of information in your file.
In a way, your good deeds will lessen the effect of one or two negative items. An exception to this would be If you are young or a new immigrant with a short history. A negative item in this instance would have a stronger effect on your score. The ultimate goal here, however, is to detect, and eliminate these errors so that you score can begin rise. And if you already have a nice credit score, your focus should be on guarding it.
So, what do you need to do to reach and maintain a maximum credit score?
1. Get a copy of your credit report, review the information in it and, correct any errors you find:
You can have inaccurate information removed by either contacting the credit agency or contacting the creditor. The Fair credit reporting act requires all credit-reporting agencies to investigate any disputed items at no cost to the consumer.
The law requires that the creditor verify the entry within 30 days or the information must be deleted from your file. If your credit report gets corrected, you will receive a free copy of the revised report.
BUT…
BUT you may ask, “where does the disputing part come into play here?” Well, disputing is a two-fold process from my experience. First, there are clear-cut reasons why a negative item on your credit report would get disputed. A prime example of this would be getting charged a bill that you already paid, and it gets sent over to collections anyway.
This would be fairly easy to dispute right? Simply go to the credit bureau that has this listed as an open account, and select the appropriate dispute reason. However, if it was really this simple don’t you think everyone would be doing it? The truth is, there are other dispute reasons that can be used to remove items from your credit report, that the majority don’t even know about.
And if you knew what they were or had easy access to them, it would take your disputing game to a whole other level. All you really need is access to the information or someone who is seasoned to help you with the process. I’ve included a free guide below that will lead you to the credit repair promise land once and for all! Let’s dig a bit deeper here.
2. Pay your bills on time:
“This is an attempt to collect a debt, and any information obtained will be used for that purpose..” Don’t you just hate that? This point is critical. Paying on time means mailing your check at least five days before the due date or scheduling an online payment at least two days before. Do not wait until the due date or try to backdate your checks when mailing them late, as this usually will not work.
If you fall into the easy trap of missing payments, it will trickle down to the collection agency blackhole. From there, you still have a chance to get things straight, but it still will require developing healthy payment habits. I don’t care how small the debt is, make sure you take it seriously. All it takes is for that agency to report you to the credit bureaus one time, and damage is done.
My wife had an experience like this, where she was paying off a medical bill, and thought she had taken care of the entire balance. She didn’t realize however that she had left a measly 9 dollars unpaid. Then she got that strange phone call. C’mon, you know what I’m talking about, from that number that you don’t recognize. If you dare to answer, you’ll find out quick that its the good old collection agency.
Now at first, she ignored the number because she didn’t know who it was. But thankfully she eventually answered, because they were this close to reporting that 9 dollars to her credit report. Wouldn’t that have been a travesty, to have your score go down over 9 dollars? I hate to even think about it!
3. Work to increase your debt-to-credit ratio:
This can be done by repaying as much as you can of what you owe on the loans you have, by increasing the credit limit on the credit cards that you have while keeping the balances low. Doing so will progressively bring you closer to your maximum credit score, and its well worth it. Do remember here, that loans for a house require a healthy debt-to-income ratio, which is why you want to try your best to have more income than debt showing on your report.
Quicken Loans, a provider of home loans emphasizes the importance of your debt-to-income ratio. So chip away at whatever debt is showing on that report and try your best to shave it down. You don’t have to make a million dollars to get the things you enjoy, you just have to alleviate debt as much as possible.
You can also apply for a new credit card with a high limit but keep the balance low or zero. Just don’t go around applying for too many cards at once (see #5 below). And don’t be tempted to spend more money just because you now have more credit available! The suggested limit here is no more than 30% of your overall credit limit. If you can maintain this balance, you’ll see your credit score begin to steadily rise.
I think sometimes people forget that the credit bureaus operate on an algorithm when it comes to reporting. Once you understand that, you discover that all you need to do here is cooperate with the algorithm for your score to rise. Part of that includes honoring healthy parameters between your credit limit and the amount you spend.
4. Protect your credit history:
Fair Isaac’s model assumes people who have had credit for a long time are less risky. So if you have credit cards or accounts that you want to close, think about it first. If you’ve been paying on it for a long time and can close it out, go for it. However, if its a newer card, even if you can pay it off quickly, you may want to pace yourself a bit here. The key word in credit history is history, and part of this involves consistency in payments over a period of time.
If you don’t have any history, you will not have any FICO score, because data collected by the credit bureaus determine how the score is calculated. Believe it or not, having no score can be as bad, or even worse than having a low score. That’s an interesting concept but think about it. If you were going to lend 10,000 dollars to someone, wouldn’t you want some proof of their credibility? Who would you trust more, someone who never borrowed money and paid it back on time, or someone who has a proven track record of making timely payments?
Now imagine your feeling of either trust or distrust displayed in number form. This is exactly what your credit score is. We all would like to leave our past behind us, but some financial mistakes like to lurk around. So while your building new credit, make sure you are resolving the things that took your score down in the first place.
You may find that it is tough to get a loan, or you may have to pay a lot higher interest rate because the lender does not have a clue whether you are a credit risk or not. This article also provides you ways to get your credit score up.
5. Do not initiate too many requests for credit, loans or other debt instruments over a short period:
If you have many recent new inquiries, your score will go down. The credit bureau algorithm will see you as a person who cannot stop borrowing money and getting into debt. So make sure that any inquiries you have done are absolutely necessary. This applies big time when getting approved for a home loan or financing a car. Go in there knowing how much you want to spend on that house and car, find out what they say your score is, and leave it there.
6. Create the right credit mix:
Lenders like to see a good mix of credit cards, retail cards, and installment loans. This includes car loans or home mortgages. Someone with only a secured credit card is considered riskier than someone with a standard credit card. However, this does not mean that you rule out a secure card altogether.
If your credit is so bad that you can’t get a normal card, secured is the way to go, and will help you to reach that maximum credit score. Someone who has a combination of installment and revolving loans will also have a better chance of raising their score due to the variety. A good mix shows the bureaus that you are faithful paying back different types of debt. The more well-rounded you are in this area, the higher your score will be over time.
With consistency, you will eventually achieve your maximum credit score goal. And if you need some help from an expert, there’s no shame in your game. I got the same help myself and can testify that it was well worth the assistance. Also, when seeking help, always remember that you are protected by the Credit Repair Organizations Act.
If you want a full overview of what it takes to repair your credit, below is a free guide that will walk you through the process step by step and will cover:
- Getting and Understanding your credit reports & scores
- Real “how-to” for improving your credit (these are the very tactics the best credit repair firms in the country use)
- Powerful action plans
To Better Credit!