What's the Perfect Credit Score?

Here's a Kiplinger piece on the perfect credit score. There really isn't one perfect score, but they do give some useful information on the range your score needs to be in to get you the best financial advantage. Their thoughts:

Once your score is in the mid 700s, you won't have trouble qualifying for the best interest rates (the median FICO score is 723).

The piece then lists three simple rules for boosting your credit score:

First, pay bills on time. Your payment history makes up more than one-third of your score, so "the single worst thing for your credit is to be reported late," says Fair Isaac's Craig Watts.

How much you owe makes up another third of your score. In FICO's model, your actual credit limit isn't as important as your "credit utilization ratio" -- the percentage of your limit that you've actually used. It's best to keep the balances on your cards below 25% of your available credit.

New credit also takes a toll -- especially for people with a short credit history or few accounts -- so be judicious in applying for it. Take on new credit only when you need it.

The piece notes that 42% of consumers have never checked their score. Maybe it's because they don't know how to get it. Here's one way:

Among the three bureaus, for example, only Equifax sells the FICO score, for which you'll pay $7.95 in combination with your free credit report -- or $15.95 for your report, score and more information at Equifax.com. TransUnion and Experian sell the VantageScore, which they've developed with Equifax. VantageScore numbers can still give you a good idea of where you stand, says John Ulzheimer, president of educational services for Credit.com. "If you have good credit, you'll have a good score regardless of who developed it," says Ulzheimer.

I haven't checked my credit score -- ever. I haven't had any debt in 10 years, so I haven't worried about it. But I need to check the score the next time I review a credit report. Looks like I'm headed off to Equifax.

Comments

New credit also takes a toll? If you have zero positives, how on earth can you improve your credit score WITHOUT obtaining new credit?

[claymeadow]

i only check credit score once per year at most, more like every two. although, I get the three free credit reports per year and look at the history to make sure that nothing erroneous/fraudulent is being posted to my credit.

[aa]

Credit card balance is a debt even if you pay it off (debt during the grace period in that case)!

Why not go to MyFico? Get a 30-day free trial.

[Matt]

New credit and credit applications make you take credit hits, but they drop off after you've had it for a bit.

[ciwood]

I just ordered a Washington Mutual card (in August) because they offer free access to my FICO score and a 1% rebate. It is great to be able to log on anytime and get my FICO score for free. They update the score monthly.

[Jared]

I've had a Providian (now WaMu) card for about 6 years and have always known my FICO. I highly suggest a WaMu card, if not for just the simple reason of getting a monthly FICO score.

PS-- Mine has been 812 for 3 months :)

[Sarah]

Not only Equifax sells your FICO score. I go onto annualcreditreport.cmo each year and get all 3 of my credits reports free and I pay no more than $8 for each of the credit bureaus FICO scores.