Can You Increase Your Credit Score to 850?
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“Apparently, I’m a financial unicorn,” says Lance Cairns of Georgia, Vermont. Cairns has worked his whole adult life to build a credit score higher than 800, a feat achieved by only 5.7% of all Americans, according to CreditKarma.com. That’s not exactly mythical, but is quite rare.
Cairns has maintained excellent credit since he began building his credit history in his early 20s. His 811 FICO score paid off when he secured low-interest rates on his mortgage and credit cards. But can someone who has accrued substantial revolving debt or made poor financial decisions in the past achieve such a score? Experts – and people who’ve done it – say yes.
Perks of the Credit Elite
Cairns was recently approved for a credit card with a 5.15% interest rate – lower than that of many fixed-rate conventional mortgages. The APR, or annual percentage rate, on his other major credit card is 7.25%. Thanks to his high credit score, Cairns also saves money on his car insurance.
Julie White, another member of the credit elite (her score is 813), enjoys multiple money-saving perks, as well as bragging rights. “My husband’s score is 793 and I lord those 20 points over him,” she jokes.
To start with, White recently obtained a 15-year mortgage with a 4.5% interest rate. “We also got lower fees on some closing costs associated with the bank, and lower homeowners’ insurance costs. Apparently, people with excellent credit are less likely to burn the house down,” she quips.
From 600 to 800+
Unlike Cairns, who has always had impeccable credit, White had a credit score in the low 600s in her early 20s. “When I was making less money, it was harder. I regularly carried balances until about 10 years ago,” she says.
Since debt utilization makes up 30 percent of your credit score – the second biggest factor after timely payments – carrying a balance can keep you out of the credit-elite category.
Once White was able to pay off those balances, her credit score spiked. She keeps it high by using Outlook reminders and online bill-paying so she never misses a payment. “Most of our household bills go on a cash-rewards credit card I pay off each month. I write only a few checks. This reduces the chance of a slipup,” she says.
Randy Mitchelson, owner of the Daily Dollar Newsletter personal finance blog, says White’s experience isn’t unusual. “Time heals all credit issues,” he says. “Assuming the consumer has perfect credit behavior for a 24-month period following bad credit behavior, he can earn a dramatically different score.”
Taking Your Credit from Excellent to Elite
Once you hit the 750 mark, it takes careful credit management to make the jump to 850. Some experts say there’s no real difference in 50 points when you reach the top of the pack, but others say that in today’s lending environment, every point helps. “A FICO score of 750 is great, but it’s no longer a guarantee for the best rates available,” says Wayne Sanford of YourCreditSpecialist.com.
Sanford points to the all-important debt-to-available-credit ratio as one way to give your score a nudge. “If you have a perfect payment history for six to 12 months, you may be able to get a credit line increase just by asking,” he says. That way, a credit inquiry won’t negatively affect your score, but you can lower your debt-to-credit ratio to gain points. “Credit unions and smaller banks are more likely to do this based on your credit history alone,” Sanford advises.
Another way to raise your score is to develop a variety of credit – a mixture of revolving and installment loans. “A good ratio is two revolving loans for every installment,” Sanford says. “So if you have a mortgage and a car loan, you should have four credit cards.”
Of course, you shouldn’t buy a new car just to improve your credit score. Sanford suggests adding your name to a spouse’s existing installment loan – another move you can make without a credit inquiry.
Credit inquiries account for 10 percent of your FICO score, so it’s a good idea to limit them if you intend to join the credit elite. “Retail store cards we apply for to get a discount, cell phone plans, auto loans, apartment rentals… these all count against our FICO score,” says Denise Winston, a money and time-saving expert. “I limit mine to no more than two per year.”
In general, the rules to join the credit elite are simple: make timely payments, keep your credit utilization up to about 25 to 35 percent of your available credit, and minimize credit inquiries.
In addition to the cost savings available to members of the credit elite, there’s another key benefit: peace of mind. The higher your score, the easier it is to stay within the “excellent” category should you make a small mistake. Mitchelson explains: “One late payment may bring you from 810 to 760 and keep you in the ‘A’ credit range, whereas a 720 person with a late payment will fall into the 600s and out of the ‘A’ range,” he says.
For more tips on improving your credit score, check out MintLife‘s Credit Score Primer.
Can You Increase Your Credit Score to 850 is provided by Experian.com
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25 Comments so far
leave a commentYou say a good way to join the elite is to “keep your credit utilization up to about 25 to 35 percent of your available credit.”
What if you carry NO debt? I mean, if you were to look at my credit utilization, I’d be sitting at 0%. Is that good or bad? Am I SUPPOSED to be carrying some type of balance?
Yes, you are supposed to be able to show to the credit reporting agencies that you can carry a balance.
If you use your credit cards and pay them off every month you will still look good. It is typically the statement balance that gets reported.
I have a credit score of 802. I didn’t actively monitor my credit score – didn’t even realize my score till my bank started offering this as a free service. Don’t own a house, paid in full for my car (no loan). Most people get very concerned about hard pulls and if having multiple cards will be a problem… what one should be really be concerned about is how you manage your debt. Simple rule of thumb – avoid credit card debt.
Or you could just pay cash and save money on the interest and not risk bankruptcy. Even with a mortgage, the more skin you put in the game re: down payment/cash, the more willing lenders are to work with you. Since a credit score = risk, more cash = less risk/money that lenders put in and so it’s to your advantage.
But if you’re paying cash instead of credit, you won’t have a credit score to begin with. Have fun going to get a mortgage from a lender without any existing credit score. That’s why it’s best to only use your credit card when you know you can pay it off. It’s not very smart to use a credit card for things you can’t afford (even though that’s the “purpose” of them).
That’s my point though, if you have the money you don’t need the mortgage.
And the more you put in, the less the credit score matters as you are less of a risk since there’s already equity in the home. IE if you put down 50%, then the bank is matching it and has less to worry about since you will pay this off in a faster time frame.
Not to mention there is something called manual underwriting which can be done regardless of credit score (ie do you pay all your utility bills on time, etc.) so it’s not like FICO is the only score that matters.
Here’s a novel though, cut up your credit cards, pay off your debt, and save up to pay for things. FICO scores are for people who like numbers. Any scoring system to determine your credit worthiness that requires you to have debt to keep the score high is just plain stupid.
Credit is a waste of time! Banks don’t deserve ANY more of our money after posting record profits, paying huge bonuses and stealing $1 TRILLION dollars from the American Taxpayer. Forget credit cards. Forget loans. Pay cash for everything and get cash discounts!!
the only issue would be getting a mortgage to buy house unless you have a good sum of cash sitting around
“Stealing”? Or receiving from your congressman’s outstretched hand? You seem to be missing one of the villains in this story.
Paying cash for a house, while possible, entails substantial delay in moving into a house. If you have good reason to live in a house, expect to derive value from the house independent of its market value, and can afford to take out a loan to buy it and will manage and pay down that loan well, I don’t think it makes sense to not get a loan to purchase the house.
Credit card debt is your FRIEND! Revolving debt is weighed considerably more than installment debt, so use your credit cards wisely, but use it or lose it!
The credit card companies have been known to terminate your account if you don’t have activity on it, which would be terrible for your score, particularly if the account is an old one!
There is a fundamental misunderstanding about credit scores. The credit score is not an indication of “personal or moral worth.” The credit score is really an indication of how profitable you are to the Credit Card Issuers. In a sense it’s a “chump” score. Its all about predicting your profitability to them – nothing more.
For example, most really wealthy people (Larry Ellison, or say Bill Gates) do not have good credit scores! Why? They don’t use credit, and the credit card companies know they cannot make a profit from the.
So to get an 850 score, just make sure you have lots of credit, make payments on time, regardless of interest rates, use credit rather than cash, — in other words become a credit card “chump.”
You’re seriously using super rich people as an example against credit? They have millions of dollars in disposable income, of COURSE they’d don’t need credit.
What a moronic comment.
So, work year to get that 800+ Score. But you can’t use it, it’ll affect the debit to credit, score goes down. Want to use to apply for a loan? Nope, that inquiry just cost you points. Cut up your cards and live off cash? Sorry you have no credit history so don’t ever want to buy a house, a car or have an emergency that requires a loan. I screwed my credit when I was 17 and I figure I’ll be paying for it for life.
Couple points:
Facebook User-Credit utilization ratios are your average amount of credit you use each month. It doesn’t matter if you pay off your bill in full or not. Heres an example, if you total limit from all your combined credit cards is say $10,000 and you only bill $1,000 a month to your cards then you use 10%.
Everyone-If you can budget money and keep your spending in control, you shouldn’t pay for anything in cash and the simple reason why? Rewards. Apply for an American Express Blue Cash and you get back up to 5% on gas, drugs and groceries after spending $6500. I don’t know about you, but a 5% discount on gas and groceries seems like a pretty good savings plan to me.
The new calculation requires you to have a variety of types of credit. Your credit past isnt indicative of your future performance. My past indicated that I pay bills on time and carry balances but I had life incidents and made decisions. Thus bad credit with a couple Judgements. My score now is low 600′s. I have one card with a low line of credit. People get high lines of credit and more able to make debt but THEY are the ones that get MORE money. Why? Its all bogus. You must pay interest and take loans deliberately just to get a half way decent score instead of being diligent and paying for only what you had available in cash money just to get a half way decent credit score to get a half way decent mortgage rate. My decision to ignore my debt might not of been the best choice to make but it is in no way how I pay off my lines of credit and how I shall pay for lines of credit and loans in the future which is paying them off early. Its bogus.
Fifteen years ago, I had bad credit. Ten year’s ago my record was clean and I had no credit. Now, I am sitting pretty. My secret, I got rid of every card I had except two (a worldperks visa from US Bank and a LL Bean credit card) kept my Newegg Preferred account for the interest free payments and stopped using cash other than when necessary paying it off every month and using the LL Bean Card once a quarter and paying it off right away. Not the strategy recommended by anyone but it worked.
Question: I recently graduated and have been living independently for the past year and a half. I opened a card in college which my parents paid, mostly emergency or flight stuff. Now I’m paying my balance on my own on that same card (its a BofA student something card) but I’m usually keeping a credit utilization ratio of about 50% on a 1600$ limit (I pay down the entire balance every month). Last time I checked my score was 738, and I assume that it has either stayed the same or gone up as I haven’t missed any payments on my bills or student loans.
I’ve heard that the 25% credit utilization rate increases your score and wanted to know if anyone could advise me whether I should ask for a credit limit increase (i make 40k) to make my ratio a little closer to 25% or if I should open a new card, perhaps something with perks since I don’t really get any now. Basically I want to know whether the benefit of a better ratio outweighs the cost of opening/closing new cards.
Thanks
“… a credit score higher than 800, a feat achieved by only 5.7% of all Americans, according to CreditKarma.com”
FWIW, the scores produced by creditkarma are not FICO scores. In fact, those who understand this refer to scores like creditkarma’s as “FAKO” scores.
Peter,
Keeping a credit card at above 25% credit utilization rate will most certainly hurt your credit rate. You want credit utilization to be less then 25% on each card you have, and you want the credit utilization for all your cards combined to be less then 25%.
Actually ideally you want to pay off your cards every month for the simple fact that the interest you are paying adds up to real money. So if possible that is what I would do, pay them off. I never maintain a balance, I always pay them off each month. I actually did for about 3 months once in my life (because a lot of things just hit all at once), and boy never want to have that feeling again, where I know that I can’t just pay them off.
As for which is better more cards or asking for another card… I don’t really know for sure, but I think I might actually get a second card (I have a second one just in case the first one won’t scan at a given place, yes it has happened to me). But this is based on the fact that I never got into the trap of actually using these cards as credit (except that one time), that is slippery road, and if you aren’t going to pay them off each month the more credit you have the more likely you will get yourself in trouble.
Personally I use the credit card companies not the other way around. I never pay a fee. I not concerned about the APR, because I never put anything on a credit card that I don’t already have the money in the bank for. I use cards that pay me cash back for using them. I use a credit card over cash because I can track my expenses better. If you use Mint or Quicken (I use Quicken) when you download your credit card transactions it makes it easier for you to categorize your spending, like Home Depot goes into Household, Savemart into groceries….
I have also used debit cards at times for the same purpose, but if you treat your credit card as a debit card that just get paid at the end of the month, and you can get a cash back card with no annual fee, you can get money back from them. On the other hand it is a very small percent so if this is even worth it depends on how much you run though the card in any given month.
For the record I got my first store card in 1975, and MasterCard in 1976, so my credit goes back for a long time, and that is what they want to see. You should be cautious of closing credit cards (and opening them for that matter), especially the cards you have had the longest, because the longer the track record of any given card the better.
I have a credit score of 820, and this is the real FICO score the one a loan company pulled to approve me for a house loan. So one thing I can tell you for sure you don’t have to actually maintain a balance past a month to have good credit. You do have to use it (Me and my wife use them almost daily). You do have pay your bill on time every time. You shouldn’t open and close (especially close) them unless you really need to.
If you can’t resist carrying a balance, you should consider not using them at all. You should use them to make your finances stronger, by showing you where you are spending your money, and by making you life simpler.
People always complain and say “credit cards are bad” and try to make it seem like the credit card companies are the reason for the individuals debt. I don’t know about you but credit cards and loans have helped me out of some tough times. I like going for cards and loans that give 0% interest for a given time. Credit cards are not at fault for people being in debt. People are at fault for people being in debt. Yes credit card companies make it much easier to get into debt but it is the responsibility of the individual to make sure that when they place something on credit, that they are able to pay that credit card bill at the end of the month. Another great example of how some Americans just can’t take responsibility for there own actions.
My wife and I have credit score above 800, without ever thinking about it.
We had a hard time getting a mortgage to buy a second house because we already paid off the mortgage on the first, always pay off our credit card balance (of ~$1500) every month, and always buy cars for cash. If I had accepted their offers, I would have paid 1% higher than the going rate as a penalty for having “bad” credit.
The recommendation I got from multiple loan agents was to be “more normal”, and get a separate credit card, put a tiny balance on it, and then only pay the minimums each month.
He said that just like people with larger debts than average are flagged as a risk, so are people who are on the other end of the scale, since they aren’t “normal”, and so don’t fall into regular categories of people that they know how to deal with.
Crazy system.
This has become borderline impossible as banks and credit card companies have cut down credit limits as people pay down on cards.
Of course, this blatantly has a negative impact on someone’s credit score every time they do this.
A few years ago, having a balance on a few low interest credit cards was all you needed to get into the upper 700′s. Now with stipulations like “abuse of revolving credit”, those days are no more. I think re-negotiating APR and monthly payments on your own is doable for most people. Then you can at least improve your score enough to get a line of credit for a down payment on a car which helps debt scores immensely.
Also, eliminating all department store credit rewards cards is a must.