I know there are some of you out there who would like to have a perfect credit score. According to the Fair Isaac Corp’s scale, the number that defines perfection is 850. Only about 1% of the population has achieved such perfection and I’m going to teach you how to be among them. Just so you don’t think I’m blowing smoke up your…ok, you get the idea there, I am well on my way to this perfect score, I just don’t have the longevity needed yet. The point is, I know what I’m talking about here.

If you looked into the credit files of the 1% carrying an 850 credit score, you’d see a lot of similarities in their files. Following is a list of the most common traits these guys share and you can use it to gage where you are.

• Between 4-6 revolving accounts (this means credit cards)
• At least one installment loan (i.e. mortgage, auto loan, etc)
• A few accounts with 20 year positive payment history (note: in order to reach the 800s you have to have at least 10 years of positive history…this is where I run into my problem as I’ve only been in the file for 9 years, but only 7 have been good)
• Around 30 years of credit use (also a problem for me)
• No late payments or other mistakes for the last seven years
• No more than 1-3 credit inquiries within a six month period
• No collections, bankruptcies, or other derogatory behaviors
• Debt levels less than 35% of credit limit

Ok, so now that you’ve seen what it takes to get to perfection, let’s look at how you get there if you’ve been less than stellar so far.

1.) Check your credit

This seems obvious enough, but many people don’t bother. I know we’ve talked about it a lot here, in great detail as a matter of fact, but when you’re trying to improve your credit score, it’s imperative to check it! You get one free report from each of the bureaus every year. I always recommend pulling one every four months, this way you have a running idea of what’s going on. You’re certainly welcome to pull all three at once, but one at a time spreads it out for better monitoring.

When I started looking for ways to improve my score, I purchased the MyFico and that was definitely worth it to me. I only did one credit bureau, so mine was less than $10 a month, but it notified me each time more score changed and I found those little emails rather motivational.

2.) Check for errors

Very often there are errors reported on your credit file. I had a collection showing on my report that wasn’t mine. I lived in a roommate situation for about 7 months and the time came for us to go our separate ways. The apartment complex we lived in allowed one roommate to be signed off of the lease and no longer responsible for the rent – it was in the contract and everything. So, we signed me off the lease and I moved on. About 6 months later I start receiving harassing phone calls and letters for money due to this apartment complex. As it turns out, the roommate bailed on the apartment complex and my information was the only information they had.

Needless to say, I wasn’t happy that the apartment complex reported me to begin with. I should have taken them to court at the beginning of this fiasco because while I got the balance taken care of immediately, it was still showing as a collection on my credit report. Even though I sent the documents showing that I wasn’t responsible – including a copy of my lease with all pertinent info high-lighted – the collection agency refused to take it off my credit report. It is still on there and now the apartment complex has been through so many management changes that they refuse to even get involved. They say it’s a matter between me and the collection agency. Naturally I’ve tried speaking to them and I’ve gotten no where. The whole ordeal has literally made me sick, so I’ve stopped fighting it. I’ve written a letter of attachment to the credit bureaus that included the documentation showing I was not at fault and left it at that. The collection is due to fall off my credit report this year and I haven’t been turned down for any credit I’ve applied for.

The lesson learned was that I’ll never live with another roommate again, and I’m much more cautious when it comes to my credit report. Take a look at yours and see if there are any mistakes. Getting those cleaned up right away can help improve a credit score quite a bit.

3.) Straighten-up your credit act

Many of us have those self-inflicted credit wounds – the late pays, the no pays, and just general bad behavior when it comes to credit. All of these things need to be corrected now if you want to get to 850. Make your payments on time every month. Follow the “get-out-of-debt” plan that works for you – you all know my take on that, so we won’t cover it here. But, the amount of debt you have is impacting your score as well, so work on getting that brought down to improve your rating. Since your most recent behavior carries more weight than past behaviors, you can make a difference in a short amount of time.

4.) Don’t spend more than you have

Remember that credit cards aren’t cash and they should be used only in emergencies or if you’re certain you can pay the balance off at the end of the month.

5.) Watch your debt-to-income ratio

In lending, the debt-to-income ratio is a tool to measure how much money you have going out every month versus how much is coming in (after taxes). This indicator helps lenders decide if it’s in their best interest to loan you more money. In most cases, the ideal ratio is 25-30%; however, many will consider lending all the way up to 50% depending on the relationship they have with you.

That’s way too much. You should try to keep it under 25% if at all possible. Sometimes that’s easier said than done, but it certainly doesn’t need to be up in the 50% range. If half of your income is going to debt then you’ve got a debt problem and you don’t need to add more to it. The exception to that is consolidation, but you have to make sure you’re not going to put yourself in the same position or worse once you’ve paid off all those credit cards.

As you can see, it’s not necessary to go to extraordinary lengths to improve your credit scores, and certainly nothing fancy involved in achieving perfection. Pay your bills on time, watch your spending, don’t apply for a bunch of credit you don’t need, and watch the inquires. Don’t expect miracles overnight, just keep doing the right things and you’ll see the improvement before too long. I will add one more thing to this already long post. Don’t beat yourself up if you don’t get to 850. Lenders are going to give you anything you want once you reach 730, the rest is just bragging rights.

What do you think? Can you reach 850, or do you have some work to do? Do you even care if you reach 850?

Related posts:

1. The bad credit repair guide
2. Banking 101: What Is Credit?
3. A Story of Sucky Roommates
4. Shedding Debt vs. the Credit Score
5. Should You Pay Off Old Debts?