If you’re looking for ways to better your credit, you’ve found a great place. When people often begin their journey to better credit, it begins with heaps of research. Finding answers to questions they didn’t even know they had yet. One such question, ‘What is a perfect credit score?’ After all, that’s what we’re all working for, isn’t it?
The credit score system most commonly used is the FICO score. First introduced in 1989 by Fair, Isaac, and Company, the FICO score model is based on credit files with the three national credit bureaus: TransUnion, Experian, and Equifax.
What is a Perfect Credit Score?
Credit scores can run a range of different numbers, depending on which score is being used. There are different FICO scores from NextGen Credit Score, to the FICO Industry Option, or the VantageScore 3.0. These are all pulling data from the same sources, it’s just how they interpret it that changes the number you receive.
The FICO score in particular ranges from 200 to 850.
In general, the perfect credit score from the most commonly used scores is 850.
Above the mid 700 ’s and you can consider yourself in the Excellent category, and able to benefit from many of the best deals available. Lower than that and you may be in the Good territory but there is certainly room to improve.
How does this score get developed? How do people get that perfect number next to their name? Let’s take a look at the metrics that go into a credit score and how heavy those are weighted. Keep in mind, for this example we are going to look at FICO scores specifically.
What Goes Into a FICO
A FICO credit score is made up of a few parts, different factors that are weighed differently depending.
Payment History – 35%
This is sort of a general section but it essentially means the presence or lack of negative information. Liens, judgments, settlements, charge-offs, foreclosures, late payments, and bankruptcies all fall under this category.
Debt Burden – 30%
This specifically looks at six metrics, according to FICO including but not limited to: debt to limit ratio, the amount owed across different types of accounts, number of accounts with balances, the amount paid down in installment loans.
Time in File – 15%
This is simply how long your credit history has aged, including the age of the oldest account and the average age of your currently open accounts. The longer the better.
Recent Searches for Credit – 10%
A surprisingly significant chunk of your FICO score value can be influenced by the number of hard pulls on your credit score. While those shopping around for better rates from various cards, mortgage, or other loans won’t see a decrease in their FICO, when done in rapid succession these are viewed as ‘one’ pull, usually. However, if there are hard pulls every 45 to 60 days apart those will each be counted and your score will reflect it. Also of note, the annual free credit report that you can pull from one of the three big bureaus does not count against you.
Types of Credit – 10%
The last 10% of what makes up your FICO score is the types of credit you are using. Whether they are installment, mortgages, revolving, or consumer finance, having more types of credit management present will give your score a healthy boost.
When it comes to credit, you can’t win if you don’t play the game. So, you need to be a part of the credit ecosystem to benefit from having a high score. The high score doesn’t mean you’ve never missed a payment, it means you have successfully utilized credit and managed debt – that’s more valuable to credit lenders.
That’s where we come in. Credit Rent Boost is designed to help our customers utilize their already existing rent payments in raising their credit score. It’s a novel approach that allows credit bureaus to count one of the most consistent payments many of us make in our lives, rent!
Showing your consistent, regular, and on time rent payments as marks that you do have a history of financial acumen.
To learn more about Credit Rent Boost and how it works, check out our Renter’s FAQ If this is something you think your credit score would benefit from, sign up now!