850 Credit Score – Benefits of Perfect FICO Scores
Everyone dreams of having an excellent credit score. The highest score possible under most FICO scoring formulas is 850. By reading this article you will get to know about the benefits of having a higher credit score and its uses.
Let’s get started by looking into sections like what is a credit score, what makes a good FICO score, and what builds a good FICO score.
What Is a Credit Score?
Your credit score is a measure of your creditworthiness. This score is called the FICO Score. A credit score is calculated from the information about your credit accounts.
The FICO credit score ranges from 300 to 850, with 300 being the lowest and 850 being the highest. There’s a reason why people want an 850 credit score, as it’s the highest score possible!
What Makes A Good FICO Score?
A good FICO score tells lenders that you are a low-risk borrower. It means that you’re very likely to pay your debts, on time, and in full. Lenders are generally looking to reserve their lowest interest loans for the lowest-risk borrowers. A perfect credit score means that you’re one of the most creditworthy people in the country.
Your credit score is based on items on your credit reports, or your credit history. Your credit reports can be obtained from the three major credit bureaus, Experian, Equifax, and TransUnion. The US government offers free annual credit reports from each of the three credit bureaus, by the Fair Credit Reporting Act. However, you cannot get your FICO score from these.
Credit Scoring Model
Credit scores are calculated based on the credit history of the users. Here are a few factors that are considered for calculating credit scores.
- Payment History Accounts
- Missed payments
- Amounts Owed
- Age of Accounts
- Credit Mix
- Age of Newest Accounts
Here are the general guidelines from Experian, one of the big three bureaus, for how they consider credit scores:
- 300 – 579: Very Poor
- 580 – 669: Fair
- 670 – 739: Good
- 740 – 799: Very Good
- 800 – 850: Exceptional
850 credit score, as you can see, is the highest credit score possible. It means that, according to the credit scoring models used by FICO, you’re one of the most creditworthy people in the country.
If your credit score is below 580, it could be preventing you from numerous opportunities. You may be unable to get many loans because of your credit score. Many people have credit scores that are too low for them to get loans at a good interest rate.
What Are The Benefits Of the 850 Credit Score?
Maintaining an 850 FICO score is one of the good financial habits. Here are the benefits of an 850 credit score. People with poor credit scores often can’t get a mortgage for a long enough term for it to make financial sense. An excellent credit score can get you a higher credit limit than someone of a similar income with a lower credit score. This can help you survive more difficult financial times by giving you access to credit when you need it.
Lower Interest Rates
Lower interest rates on loans like mortgages, car loans, and personal loans. This lowers the overall cost of any loans you take. Learn how to prepare your credit for a mortgage. You are qualified for any credit card that accepts your income level.
Though having an average score is enough to secure a loan, maintaining excellent credit accounts will give you a higher credit limit sometimes with no limit also. A perfect credit score like an 850 fico score and more will ensure the loan providers that you don’t have any late or missed payments.
Easy Loan Approvals
You will be able to personally guarantee initial business loans, and getting a loan from a bank will be very easy. Taking advantage of your ability to get more credit can give you a leg up financially in a business. A credit card issuer might reject your application for a credit card if your score is too low. Someone with an 850 credit score or more will be considered an excellent credit score and not get rejected for a credit card, and some people may be able to get a card with no limit.
Loans for Low-Income People
Aside from income, credit card issuers care greatly about FICO scores. You will get the most favorable terms, allowing you to stretch out your financing over a long period.
How Do You Build 850 Credit Score?
Make All Your Payments on Time
Don’t miss payments. Your payment history is the most important part of your FICO credit score. If you are unable to afford a payment, call your lender and let them know of the situation to see if they’re able to work something out with you. This is a much better option than simply ignoring it!
Missing a credit card payment can have serious negative effects on your credit score, especially if you don’t make up the missed payment as quickly as possible.
For student loans, you can often get your payments put into forbearance, giving you some breathing room during difficult financial times.
Don’t Take Out Loans That You Can’t Afford to Pay Down
This is simple and obvious, but many people miss this and end up in financial straits. Installment loans are often a way that people try to make big purchases, but missing payments can be disastrous. Credit card debt is one of the worst things you can get into, as credit card debts affect your score more than other types of debt!
Use Your Credit Cards Responsibly
Don’t carry large balances month over month. If you can afford to, pay off your credit cards in full every month. Contrary to popular belief, you don’t need to carry a balance over to maximize your benefit: you just need to use it and pay the payment when it’s due.
Your credit utilization ratio is what truly matters, which is equal to your balance divided by your available credit limit. Keep your credit utilization ratio below 30% if you can help it!
Read More: Credit Card Management All You Need to Know
Build a Good Credit Mix Over Time
The different types of credit accounts under your name for your credit score. If you have both revolving credit and installment credit, your credit score will increase by a few points.
You can build and maintain a good credit score even if you only have credit cards, so if you don’t have much of a credit mix you don’t need to worry about it.
This doesn’t mean going out and getting a student loan, car loan, and a mortgage all at the same time (this will hurt your credit score!) Instead, you’ll want to take on different types of debt one at a time, while having various types of debt within 7 years.
Keep Old Credit Card Accounts Open
It is better to keep your unused credit cards open so that you will be having a longer average credit history and a larger amount of available credit.
Credit scoring models will reward you for having a long-standing credit account and for using a small portion of your credit limit.
Additionally, a part of your credit score is determined by your credit history. On considering the age of each account and how long it’s been since you used one. While your payment history and amount owed make up the bulk of the score.
Check Your Credit Reports Regularly
Your credit reports may have mistakes, as even the best financial institution can make clerical errors from time to time. You have the right to dispute any item on your credit report that isn’t supposed to be there!
My Credit score is 850. What Do I Do?
Following the tips above will improve your credit over time. Your credit will improve as you get more financially responsible. Paying down debt will help, too. Remember, your payment history matters the most, so make sure to make your payments on time.
If your credit has been marred by years of financial mistakes, errors on your credit report, and bad luck, there could be helpful for you. You may benefit from credit repair.
Credit repair services like The Credit Pros help people dispute errors on their credit report, help them get bad marks on their credit removed, and give financial services to help them build their credit score.
The Credit Pros has years of experience dealing with credit bureaus and lenders and helping people repair their credit. Our credit experts will help you through any situation, and we’re only a phone call away. They also offer credit monitoring using their AI-powered credit management tool that you can check on your phone.
Give a call to The Credit Pros to see how they can help repair your credit: no matter what your situation is!
I Need Help With A Specific Situation!
Got items in collections that are damaging your credit score? Check out this article about how to handle collections accounts!
Errors on your credit report? Learn about the Fair Credit Reporting Act and how you can use it to get the bureaus to correct their mistakes!
Just had a divorce? Moving on is hard, but getting back on your feet financially can be even tougher. Check out this article about how to recover from the financial blow of a divorce!
New credit-holder that wants to build credit? Check out our official guide on building credit for new credit holders!
Frequently Asked Questions
- How often do credit scores change?
Your credit score changes as your credit report changes. Therefore, it can change often since new information is added to your credit report all the time.
- What is the 850 Credit Score?
There are many different credit scores with differing ranges. 850 credit score is widely considered the highest credit score in most of the scoring models.
- What is a good credit score?
Because there are many different credit scoring systems with different scales, a good credit score depends on the scoring system used by your particular lender. However, you can get a very good idea of whether you have a good credit score by getting a credit score and report from the credit bureaus.
- Do late payments affect a credit score?
Paying bills on time is generally the most important contributor to a good credit score. Being late on any bill, for any length of time, is a possible indication of future nonpayment of debt and is almost always viewed negatively by lenders. Any late payments will remain on your credit report for up to seven years.
- Does cosigning for a loan affect a credit score?
Absolutely. By cosigning, you are accepting full responsibility for the debt if the other person does not pay as agreed. A cosigned account will appear on both your credit history and the other person’s. All loans and credit card accounts that appear on your credit report will impact credit scores.