You don’t need me to tell you how vital a Credit Score is. The better your Credit Score, the more Financial opportunities you have. The lower your Credit Score – well, you might as well be on some secret blocklist because you won’t be able to live much of a quote-unquote “Normal” life.
But what if there was a way you could “Improve Your Credit Score,” not just to a respectable level, but to get it to the super-elusive 800 Credit Score? And not only that, what if the method was FREE?
I know that sounds crazy, but this article will cover How You Can Get An 800 Credit Score Free. Ready? Let’s go!
How Does Credit Score Work?
Before you can figure out “How to Get a Perfect Credit Score,” you need to understand “How the Credit Score Works.”
Just like your grades in class depend on homework, tests, attendance, etc., your credit score also reflects on different things you do.
How Often You Paid Your Bills On Time?
The first part of your credit score is how often you’ve paid your bills on time. It is worth 35% of your credit score. This one is straightforward to understand.
Don’t forget to pay your credit card bill and never pay it late. You’ll need to pay your bills on time almost every time to get a perfect credit score. It is probably one of the most critical parts of this equation.
Here’s how this works and how to figure it out.
The credit card company looks at your on-time payments and divides that number by the total number of payments you’ve made. Then, based on that, they figure out what percentage of your bills you paid on time.
Here’s an example:
Let's say you've had one credit card for 60 months and missed one payment. If you divide the number of payments made on time by the total number of payments, you get 98.3%. It might seem reasonable, but that 1.7% can significantly impact.
But in a different situation, let’s say you’ve had two credit cards for 60 months each and missed one payment. Well, you now have two credit cards with a total of 120 payments, which means each one needs 119 on-time payments.
If you divide that number by the 120 total payments you’ve made on both cards, you’ll find that you’ve made 99.1% of your payments on time. It lifts you into the right category, which is much better.
And to give you one more example, let's say you've had one credit card for just 15 months, but you forget to pay one bill. The same math still works. You have paid 14 bills on time. If you divide that by the 15 payments you've made, you'll see that you've only been 93.3% on time. That's not good. It's kind of terrible.
You could stop this from happening if you didn’t miss a payment in the first place and if you had more credit for a longer time. With more credit lines, you also have better odds of a missed payment not hurting you as much.
For example, if you had ten credit cards for five years, that is 600 payments. If you missed one payment by accident, you would still have paid 99.8% of your bills on time, which isn't the end of the world.
When paying off a credit card on time, the good news is that you have to make the minimum payment every month, usually between $25 and $50.
Even if you can’t pay off your credit card bill in total, making the minimum payment on time every month will help keep your score in this category, which is an essential part of your score.
Credit Utilization is the next most important part. It counts for 30% of your grade. Now, to get an 800 Credit Score, the credit bureaus want to see that you’re not maxing out all of your credit cards and only using a small portion of the total credit you have available.
It would be best if you tried to spend less than 10% of your total credit limit. It shows the credit card company that you’re good with money and doesn’t need all the money they’ve given you.
Here’s how it’s calculated.
Let’s say you have a credit card with a limit of $10,000 and you go out and spend $6,000 on it. That equals 60% of your available credit, which is terrible. And because you have a higher balance, you’re seen as a riskier borrower. It will lower your score.
On the other hand, if you have the same credit card with a $10,000 limit, you spend $6,000 but pay it off in full when it’s due. That means you now owe $0 on a $10,000 credit line. It means you are using 0% of your available credit, which makes the credit bureaus very happy.
How Credit Card Companies Play The Game?
Credit card companies don’t care about how much money you spend but how much credit you use. So, if you have a $300 credit line and spend $300, it means you’ve reached the limit on your card.
You’ve used up all of your credit, which is terrible. But if you spend the same $300, but this time you have a $30,000 credit line, it shows that you are only using 1% of your credit, which is excellent.
One way to help with this is to have a lot of available credit with really high limits on each one. If you have more than a dozen credit cards right now, and many of them have credit lines of more than $30,000, odds are you won’t be spending that much money very quickly.
It’s helpful if some considerable expense comes up, but even if something does, your credit utilization rate will not be too heavily affected with so much available credit.
Some say to keep a small balance on your credit card at the end of every month so that the credit bureaus have something to report. It is not valid. Keeping a balance on a credit card won’t help your score, and if anything, it will cost you more money in interest.
Also Read: 6 Steps To Live Debt Free Journey
So it’s always best to pay it off in full by the time it’s due. And never, ever have a credit card balance. If you want an 800 Credit Score, try to keep your balance at 5% or less of your available credit.
That doesn’t mean you can’t spend more than 5% of your available credit, but you should pay it down before the end of the statement cycle. So, the credit bureaus will have less money to report on.
Also, even though it seems counterintuitive, it will help if you go out and get more credit cards. It is because it will increase the total credit limit you have, which will lower your overall credit utilization.
On top of that, you should ask your credit card company every six to twelve months to raise your credit limit. This way, you’ll constantly be lowering the amount of credit you’re using, which will help your score.
Of course, this doesn’t mean you should spend more money because you have more credit. These tactics help your credit score, not a way to get the new iPhone14 Pro Max.
The amount of money you keep as a balance on a credit card will only be there for a short time. It is one of those things that will hurt your score only until you pay off your credit card, after which your score will go up.
So if you have a high utilization rate right now or soon, it’s not the end of the world, and your credit score will go back to normal once you pay it down. It’s worth noting that the average length of your credit history makes up 15% of your overall credit score.
It means that the sooner you start and the longer you’ve had credit, the better. It is one reason I always tell people to start building credit as soon as possible, even if that means getting a credit card the day they turn 18.
It will help you start building your credit history right away. Of course, this is a bit of a double-edged sword since we’re most likely to abuse credit when we’re younger. But hopefully, that isn’t you. Because you’re reading Investocker.com, you are probably pretty responsible.
Also Read: The 3 Index Funds To Invest In For Long Run
So, you don’t have to pay anyone to try and raise your score. You can do all of these things yourself for FREE. Just remember to keep working at it and maintain that excellent score. Then, when you apply for any loan, you can get the best deal.