Perfect credit is hard to come by. Here’s how some people manage to get it.
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Building a high credit score takes hard work and determination. But achieving a perfect one really requires an exceptional effort.
Under the FICO credit scoring system -- the gold standard here in the U.S. -- borrowers are rated on a scale of 300 all the way up to 850. A score of 300 is downright abysmal -- if that's what yours looks like, good luck getting any sort of financing. On the other hand, scores above 700 are generally considered good, while those in the mid-to-upper 700s are considered very good. And a credit score of 800 or above is considered excellent.
But while it's possible to get your score into the 800 range, getting that 850 is a feat reserved for the elite few. Still, an estimated 1.2% of FICO® Scores in the U.S. are actually perfect, according to credit bureau Experian. If you're looking to join their ranks, here are a few things you should know about people with perfect credit.
1. They don't carry a lot of debt
People with perfect credit don't necessarily have zero debt -- they just manage it very well and keep it on the low side. Experian reports that people with perfect credit owe $3,025 in credit card debt on average, compared to a national average of $6,445.
If you're currently carrying a credit card balance, paying off much of that debt can help bring your credit score up. Of the various factors that go into calculating a FICO® Score, credit utilization is one that carries a lot of weight. Utilization speaks to the extent to which you're using your available credit, and you never want to use up more than 30% of your credit at once. This means that if you have a $10,000 borrowing limit across three credit cards, you should never have more than $3,000 outstanding. Paying down some debt could therefore boost your score tremendously.
2. They tend to be older
Though length of credit history is just one factor out of five that goes into calculating a credit score, it does play a role in determining that number. It's therefore not surprising to learn that most people with perfect credit are on the older side. Baby boomers, for example, account for 58% of people with perfect credit, while Generation Xers account for 25%. Millennials, by contrast, make up just 4%.
Now obviously you can't change your age to help compensate for the advantage older borrowers have on the credit score front. What you can do, however, is start building credit as early in life as you can. Apply for a credit card in college and use it responsibly, and make your student loan payments on time and in full once you graduate. Taking these steps in your late teens and early 20s will help you establish a solid credit history that works wonders for your score.
3. They earn a decent living
The amount of money you earn does not play a role in determining your credit score. That said, the more you earn, the easier it may be to minimize unhealthy debt and make your existing debt payments on time, both of which can boost your score.
According to Experian, a little over 20% of Americans with perfect credit earn between $76,000 and $100,000. Meanwhile, 21% earn between $101,000 and $150,000, while another 20% earn between $151,000 and $250,000.
But that doesn't mean you can't achieve a perfect credit score on a lower salary. In fact, 8% of Americans with perfect credit make $25,000 or less. If you manage your income wisely, you can avoid racking up needless debt while staying current on your bills. To this end, it helps to set up a budget to see where your money is going month after month, and also, to have a healthy level of emergency savings. This way, if an unplanned expenses pops up, you'll have the option to dip into your savings account rather than charge that bill on a credit card, pay it off over time, and risk bringing down your credit score in the process.
Do you need perfect credit?
Let's be clear: While a perfect credit score might seem like a cool thing to have, you generally don't need one to borrow affordably. In fact, once your score climbs into the 800 range, it almost doesn't matter what that exact number is, because chances are, you'll qualify for the best available rate out there. Therefore, if you want to achieve perfect credit as a personal goal of sorts, by all means, go for it. But don't drive yourself crazy if the score attached to your name is already in excellent territory.
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