It's important to have good credit, especially if you're looking to get approved for a loan, credit card or mortgage. Attain that perfect credit score of 850, however, and you've reached financial VIP status. Since your FICO score is an indication of your creditworthiness, the pinnacle range of 800 to 850 can qualify you for the lowest possible interest rates and make you more likely to get approved for just about any credit product you apply for.
Membership in the “800 Club” isn't impossible — nearly 20 percent of consumer credit scores are above that mark, according to MyFICO.com. You can be on your way to getting an 800 credit score by following these seven tips.
1. Pay Down Higher Debt First
It might seem convenient to pay off your smaller debts first, then gradually work your way up to those larger balances. However, making the sacrifice to pay off your biggest revolving debts — such as credit cards — first could help increase your credit score, according to MyFICO.
Pick the credit card with the highest balance, and make your payments as large as possible. If you have multiple cards with varying balances, experts recommend paying off the one with the highest balance and lowest credit limit, since the higher the credit utilization ratio, the worse the damage to your credit score. In fact, keeping your credit card balances around 10 to 30 percent or less of your credit limit is optimal, according to some credit experts.
2. Get Overlooked Accounts Reported
FICO considers positive history on things like utility and rent payments to be "alternative" data, meaning that information isn't traditionally factored into a FICO score. However, FICO announced a pilot program in 2015 that it said "allows 12 of the largest credit card issuers in the U.S. to use alternative data to identify creditworthy individuals who would otherwise be unlikely to obtain traditional credit."
"Based on extensive research, FICO’s data scientists found that alternative data such as property records, telecommunications and utility information can reliably be used to score 15 million consumers who do not have enough credit data to generate FICO scores," FICO said in its announcement. The credit scoring company said it planned to make the program available to more lenders over time.
You could, therefore, potentially benefit in some instances if you have positive payment histories for your cellphone, cable or utility bills listed on your credit report. Pull your credit report and see what's listed, then call each provider to see if they can begin reporting your payment activity. If you're a renter, you can also ask your landlord to report your monthly rent payments.
3. Pay Off Debt With a Personal Loan
A personal loan is another option to help you pay down debt and build credit, said business coach Jeffrey Kelly. It can help your credit score by adding an account to the mix, increasing your available credit once you pay down your credit cards and contributing to a history of on-time payments, he said. Only attempt this method if you can afford the payments; otherwise, this approach could hurt your credit score rather than help it.
4. Transfer Debt to Business Credit Cards
Transferring balances from your personal credit cards to cards that aren't listed on your credit report, such as business credit cards that aren't personally guaranteed by you, could potentially increase your credit score. “Your balances (utilization rate) will appear lower, even though you owe the same amount of money,” said credit expert Jason Kaplan.
Use this strategy carefully. Although this can give the credit bureaus the appearance that your personal debt is lower than it actually is, remember that you still owe the money, and making on-time payments, above all else, is your main priority.
5. Open and Close Accounts Sparingly
If your New Year's resolution is to aim for an 800-plus credit score, your mantra should be “In with the old, out with the new.” People who have credit scores of 800 or higher know that striking a balance in credit usage is important. One way to do this is to avoid applying for and opening too many new credit accounts, and refrain from closing unused or old ones.
Every time you apply for new credit, you receive an inquiry that can ding your score. Opening too many new accounts at once can also send the message that you're relying too heavily on credit. Meanwhile, closing an account can reduce the length of your credit history, not to mention reduce your available credit and raise your debt utilization ratio if you have debt on other cards — which can lower your credit score.
If you have old accounts, don't leave them dormant. Instead, use them once in a while on small purchases to keep your credit revolving and current, and pay those balances on time and in full.
6. Ask for a Higher Credit Limit
It would seem like asking for more credit is like asking for more debt, and hence, a reduction in your credit score. However, getting an increase in your credit limit can benefit your credit score, since it improves your credit utilization ratio.
Try contacting your credit card issuer to see if they'll comply, but be aware that it's up to their discretion. One card issuer, Capital One, noted on its website that it weighs a number of factors when deciding on a credit limit increase. To make sure you can afford the higher limit, a history of on-time payments and making more than the minimum payment are key considerations.
7. Negotiate With Your Creditors
Late payments and defaults are a surefire way to send your credit score as far away from the 800 mark as possible. If you've had financial trouble in the past, or see it fast approaching, there are steps you can take to undo or prevent damage to your credit.
If you foresee having trouble making payments, you can try negotiating a payment plan with your creditor. An altered payment plan could make it easier for you to pay on time. If you have late payments or debt collection items on your credit report, try asking the creditor to remove the derogatory items from your credit report, according to consumer law website Nolo. It might take some effort, but if you're successful, these steps could improve your score.