How To Get An 850 Credit Score

An 850 Credit Score Is Possible

Credit and credit scores can affect nearly every aspect of our finances. And our finances can impact almost every other part of our lives. Like the neighborhoods we live in, where our kids go to school, and the jobs we have access to. So naturally, the goal of an excellent credit score is one many aspire to achieve. Understanding what credit scores are and how companies calculate them helps us know our next best move.

What is a credit score?

First, let’s explore what exactly a credit score is:

A credit score is a numerical value representing your estimated creditworthiness based on your reported financial behaviors.

Every financial behavior you engage in, reported to the credit bureaus, is a data point used to calculate your credit score. And to make things even more complicated, each one of the credit bureaus calculates its proprietary version of your score. So it is common for someone to have different scores simultaneously, depending on the queried credit bureau.

Credit Bureaus

Experian
Transunion
Equifax

Commonly Used Proprietary Credit Scores

Fico
VantageScores

FICO Scores

When people talk about their “credit score,” they often refer to their FICO score. The Fair Isaac Corporation developed and introduced the FICO scoring model in 1989. Since then, it’s become one of the most widely used credit scoring models, with 90% of lenders estimated to use it.

Lenders may choose to use only your FICO score, or they may also use other gauges of creditworthiness, including different types of credit scores.

VantageScores

In the United States, there are three primary credit bureaus. These are entities that track credit and help generate reports. These agencies–Equifax, TransUnion, and Experian–developed their credit scoring model in 2006. Called the VantageScore, this model uses a scoring system that now uses the same score range (300-850) as that of the FICO system, so consumers can still easily understand what “good” and “bad” credit scores are.

What do credit scores look at?

Since there is no single credit score, it’s important to note that various credit scores may use multiple methods to weigh your creditworthiness. Though models can vary widely, we may understand better what types of things credit scores will take into account by looking at some of the data that a FICO score uses. Fortunately, myFICO offers insight into the categories of data used in credit scoring. Here are five types of data that FICO scores use:

Payment History (35%) – This data relates to precisely what it sounds like–your history of making payments you owe. Lenders may want to know what you have and have not paid on time.
Amounts Owed (30%) – This data relates to payments you owe and can help lenders determine how comfortable they are with allowing you to borrow based on how much you already owe. This category also covers your credit utilization rate, which weighs how much credit you use against how much is available.
Credit Utilization Ratio: Divides your credit balance by your credit limit.
Length of credit history (15%) – This calculation looks at how long your credit history is. This metric may lend context to potential lenders and help them understand how you handle credit over time.
Credit Mix (10%) – This data relates to the different types of credit you’ve used, whether credit cards, mortgages, installment loans, or others. This metric can help paint a clearer picture of your credit history. A good mix of credit might help show lenders that you can manage different types of credit.
New Credit (10%) – Taking out too many lines of credit can be risky. FICO scores consider your new credit lines.

Though there are different ways to score and understand creditworthiness, understanding some of the types of data that FICO scores use can help us better understand how our actions impact our perceived creditworthiness, primarily to lenders.

We can also look at how different data types are weighted–for example, your payment history is one of the most important data types in your FICO score, while credit mix and new credit are weighted lighter. Understanding how types of credit-related behavior can have varying levels of impact on your credit score and potentially your perceived creditworthiness can help us better understand how we may be able to maintain or improve credit scores over time.

What is a good credit score? Where does an 850 credit score fall?

An 850 credit score is an excellent score. 850 is the very highest that your FICO score can go. Similarly, this represents the highest possible value for a VantageScore. But what if your credit score isn’t 850? The truth is, it’s likely not since very few people have such high credit scores. Let’s look at a few benchmark scores to understand how these numbers–ranging from 300 to 850– can reflect your perceived creditworthiness.

Experian explains that:

FICO scores between 800 and 850 are considered excellent.
FICO scores between 740 and 799 are considered very good.
FICO scores between 670 and 739 are considered good.
FICO scores between 580 and 669 are considered fair
FICO scores between 300 and 579 are considered poor.

While FICO and VantageScore have the same range (300 – 850,) Experian breaks down VantageScores a little differently:

VantageScores between 781 and 850 are considered excellent.
VantageScores between 661 and 780 are considered good.
VantageScores between 601 and 660 are considered fair.
VantageScores between 500 and 600 are considered poor.
VantageScores between 300 and 499 are considered very poor.

With this in mind, it is perhaps surprising that achieving a solid 850 credit score may be challenging. However, even improving one’s score from a fair range to a very good or excellent range may be a great goal to aspire to.

Ways to improve credit

While it may not be your goal to get a perfect 850 credit score, you should improve your credit as much as possible. After all, your credit score can affect your ability to take out loans, secure a suitable mortgage, take out lines of credit and more. So, how can you improve your credit score systematically? We’ll discuss a few approaches you can take and tie them back to some of the concepts we’ve already discussed, such as how your credit score is weighted and how different actions can impact your credit.

Making payments on time

One of the most significant actions you can take to improve or maintain your credit scores over time is simply paying your bills on time. This strategy may be for your credit card issuer, bank, or any other institution you have debts with. Individuals can increase the likelihood of not making late payments or defaulting in several ways. Some of these include:

Strong budgeting: Carefully budgeting your money can help ensure that when the time comes, you have money in your account to pay off your bills.
Setting up reminders: The problem that causes late payments isn’t always a lack of funds. It’s also possible for organizational challenges to interfere with your ability to make timely payments. By setting reminders to pay bills, you may be able to manage your payments better.
Utilizing automatic payments: Some entities will allow you to make automated payments. This tactic can help individuals with difficulty keeping track of their bills to make timely payments.

Utilizing varying forms of credit

Since your credit mix can impact your credit score, utilizing different forms of credit may help you improve your credit score. There are many types of borrowing, including personal loans, credit cards, mortgages, and more. However, it’s important to remember that your credit mix is less critical than your payment history for FICO score weightings. In other words, taking out multiple forms of credit may not help much if you’re likely to default or make late payments on those forms of credit.

Keeping your credit utilization ratio low

Another way to improve your credit score over time may be to improve your credit utilization ratio. We’ve already discussed this a bit, and it’s an important metric to keep track of. When we discuss credit utilization ratios, a number you might see come up, again and again is 30%

What do the experts say?

Many experts recommend keeping your credit utilization ratio at or below 30% as a general rule. However, this is not a rule set in stone, nor is it a hard limit. Instead, this figure represents a reasonable amount of credit utilization and, for many people, a part of their path toward better credit. Keeping your credit utilization ratio below 30% can improve your credit score.

Paying off debt

One of the ways you can improve your credit score is by paying off debts. For some individuals, quickly paying off debt can be a significant way to improve their credit score. In addition, this can help improve your debt-to-credit ratio, which may help you improve your credit score over time. Some ways you can work on your debts might include:

Budgeting carefully: just as is the case with making timely payments, your budgeting can help you ensure you have the funding to pay off essential debts.
Exceeding minimum payments when you can: by paying off more than just your minimum payments, you may be able to pay off debts sooner, which can positively impact your credit score.
Consider debt consolidation: Discuss your plans with a financial expert before consolidating your debts. Debt consolidation only sometimes helps and can lead to further economic woes. However, there are some cases in which an individual can consolidate debts from various credit accounts and more easily pay them off.

Avoiding unnecessary hard credit inquiries

You might have heard of hard and soft pulls in the context of credit scores–but what are they? A hard credit inquiry, or a hard credit pull, is when you apply for credit, and the lender checks on your credit score. This action can impact your credit score, and multiple hard inquiries in a short time can potentially harm your credit score. Some ways you can avoid too many hard inquiries include:

Avoid taking out credit when you don’t need to: The most straightforward way to avoid hard inquiries is to avoid giving a reason for one. Try to avoid taking out unnecessary credit.
Do lots of research before applying: This can help you in more ways than one. Firstly, you can rule out potential lenders far before the application process. Second, researching lenders is always a good idea, as you can better understand which is ideal for your unique situation.

The Bottom Line

Many of us aspire to that magic number–an 850 credit score. While getting the highest possible credit score–especially overnight- might not be feasible–it’s essential to understand how we can take small daily steps to improve our credit. Credit scores can impact many areas of our lives.

Conclusions

Building credit isn’t a race; it’s a marathon: Getting your credit score to improve can be an uphill challenge. Remembering this won’t be an overnight process, and taking small steps is ok.
Go easy on yourself: Your credit score doesn’t necessarily reflect your identity. Take a deep breath and go easy on yourself if you feel frustrated. While paying off debts and improving your credit score might seem complicated, it’s possible.
Remember which factors affect your credit score: As you navigate your credit score journey, remember some of the factors that we discussed, such as:
Your payment history and making timely payments
Your amounts owed, your credit utilization ratio, and your debt-to-credit ratio
Your credit mix, new credit, and hard inquiries

Ultimately–though improving your credit can be a challenge–it can also be well worth the effort and entirely possible. Remember to remain patient, consider the many factors affecting your credit score, and take things one step at a time.