In the elusive world of credit reporting, it can seem like a challenge to achieve the perfect score, which, according to the U.S. Federal Trade Commission, is a FICO or composite score of 850. In addition to paying all bills on time, you must also monitor your credit report, watch how you use credit and make corrections any time an error occurs.
Pay Bills Promptly
The single most vital element of a perfect credit score is on-time bill paying. Don’t miss, skip or defer payments, or you run the risk of getting dinged and lowering your score. Consider online bill payments or automatic withdrawals, or pay your bills early to avoid late mail delivery or slow processing that could delay payment. Don’t over-use the credit you have available to you. For best results, don’t exceed charging more than 10 percent of your total credit availability at any time.
Know Your FICO Score
Your FICO score is a combined tally of your credit history that takes into consideration not only bill payment history, but also length of credit accounts, the type of credit you have, the percentage of credit you use and how many new accounts you have. You can bump your score by not maxing out every card you hold and by maintaining low balances on open accounts. A good mix of credit can also raise your number -- for example, an auto loan, mortgage and credit cards demonstrate an ability to handle different kinds of credit responsibly.
Keep Good Records
Keep copies of your bank and financial statements and print records or record payment confirmation numbers when you pay bills online or by phone. In the event your credit report ever shows a slow or missed payment, you’ll have the information necessary to dispute the report. If you need to show proof of payment, never send in original documents -- always use copies.
Having your credit report pulled and reviewed too frequently can result in a lowered score. Limit inquiries by only seeking credit when necessary or when you’re ready to make a major purchase like a car or house. While the drop in your credit score is negligible and temporary for minor inquiries, it will keep you from a perfect score.
Monitor Your Report
Request a free annual credit report from each of the three major credit reporting agencies, Equifax, Experian and TransUnion, or subscribe to a credit-monitoring service that alerts you to changes in your credit score status. This will help you keep track of and address unauthorized inquiries or account openings, potential red flags that indicate identity theft or misreported late payments.
Fix mistakes as soon as they arise on your credit report. The FTC has sample letters you can use to contact credit reporting agencies and make corrections. They have 30 days to address your concern and make corrections and inform you of their actions in writing. Avoid so-called credit repair organizations that claim they can give you perfect credit for a fee. If a score decline is due to legitimate issues, they can’t be removed from your credit. If your score decline is due to errors on your report, you have the power to rectify the errors yourself.
Credit report scores can ebb and flow over time, with reporting agencies giving weight to longevity and consistency in your long-term use of credit. Issues such as charge-offs, bankruptcies and repossessions will stay on your credit report for years and make a perfect score unattainable. Achieving and maintaining a perfect score can take many years, so patience is vital.
Lisa McQuerrey has been an award-winning writer and author for more than 25 years. She specializes in business, finance, workplace/career and education. Publications she’s written for include Southwest Exchange and InBusiness Las Vegas.