Achieve the Optimal — Not Highest — Credit Score

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Credit Score

If you're a smart consumer, you probably keep an eye on your credit score. At least one annual peek can tell you if your score is healthy enough to support a new mortgage or car loan, for example.

You might also know that the scale tops out at 850. That begs the question: What do you need to do to achieve the highest score? And what number is actually good enough? After all, getting all the way to 850 is probably impossible, so is there an optimal number, beyond which you don't need to work to improve your score?

That's the question recently answered at personal finance blog LearnVest. Bottom line: 760 is the tipping point; beyond that number, there are diminishing returns. According to Anthony Sprauve, director of PR at FICO, "It's important to understand that if you have a FICO score above 760, you're going to be getting the best rates and opportunities."

How can you reach 760 and beyond? For that, technology blog Lifehacker comes to the rescue, with a breakdown of the factors that go into calculating your score:

Payment history: 35 percent of your total score is calculated based on your diligence in making payments on bills and loans. To maximize your performance in this area, pay your bills on time. It's that simple.

Credit utilization: Another 30 percent of your rating is based not quite on what you owe, but more precisely on the ratio of what you owe to your available credit limit. If all of your credit cards are maxed out all the time, that's a very poor credit utilization score. But if you only use a little of your available credit, that's good. The lesson here is that it can pay to leave credit cards open even if you don't use them; if you cancel all your lines of credit, you'll damage your credit utilization score.

Length of credit history: 15 percent of your score is based on how long you've been generating a credit history. So if you're young and just out of school, this part of your score won't look as healthy as someone who has been using a credit card for decades. The lesson here is to start using credit -- responsibly -- as soon as you can.

New credit: 10 percent of your score is reserved for accounting for opening new credit accounts and having your credit checked. Keep in mind that these activities tend to hurt your credit rating in the short term.

Types of credit: Finally, the last 10 percent comes from the particular mix of types of credit you have, and that secret sauce includes auto loans, mortgages, credit cards and more.

With all that in mind, it's obvious that most of the factors governing credit score are fairly simple. The bottom line: Avoid late payments, minimize your credit utilization, nurture your credit history and avoid opening new credit accounts as much as possible.

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