Whether you’re buying a new home or interviewing for jobs, you’ll need a really good credit score.
A credit score measures your financial health, aggregating your financial history to inform creditors of your capacity to secure a loan, rent a home, and so forth. While most Americans have an average credit score of 675, it is possible to achieve a perfect credit score of 850.
First, it’s important to understand how credit scoring works. Many creditors use the FICO or VantageScore scoring systems, which combine financial data from Equifax, Experian, and other credit bureaus. Each system ranges from a low of 300 to the “perfect” 850 score.
The key to achieving a perfect credit score is paying your bills on time. Late or missed payments are considered public record, so you’re not fooling anyone if you don’t pay off your credit card in time or fail to make a monthly rent payment. The best way to handle your credit card is to treat it like a debit card—and only make purchases you can afford. Then, turn on your autopay feature to never miss a payment.
You should also keep track of your credit card utilization rate—the ratio of how much you’ve spent on your credit card versus the card’s limit. The ideal utilization rate is less than 30 percent of your card’s limit, so don’t load up purchases on a single card. It can muddy your credit score.
Use one or two go-to cards, and don’t overspend. That way, you’re well on your way to a perfect credit score.