My Quest for the Perfect Credit Score

Jacqui Kenyon
Posted

credit  scoreTwo years ago, I began an every-other-day ritual of checking my credit score. And that ritual gave birth to a mission: I’m shooting for 850, the perfect score.

If my score changes, I will often call my parents to conference about it (whether they want to or not). I recently gave an impromptu subway lecture about the importance of your credit score for future purchases to a friend who funds his life with a debit card, which doesn’t build credit. Though I haven’t quite reached the point of bringing it up on dates, I may have a preferred range of credit scores in mind.

I can pinpoint the moment when I became this way. It was the day I learned—while reading a LearnVest article, in fact—the definition of one little phrase: credit utilization.

Credit utilization, one of the factors that has the highest impact on your credit score, is the percentage of your total available credit that you are currently using (you can calculate this by taking the total of your credit card balances and dividing it by the total of your credit card limits). Those with the best credit scores keep their credit utilization rate below 30%.

RELATED: Credit Scores 101

Up until that point, I’d assumed that I had as good a credit score as was possible for a 21-year-old. When I turned 18, I opened a credit card, which I paid off in full and on time every month. But this whole credit utilization thing appeared to be a game-changer.

I only had one credit card, with a low limit of $700, since I was in college and only employed part time. Never one to carry around cash, I used the card for most of my expenses, including groceries, books, gas and entertainment. This brought my balance up to about 50% of my limit more months than not.

Even though I always paid my bill in full at the end of each month, I learned that depending on when the bank reported to the credit agency, my score could be taking a hit for my relatively high credit utilization.

  • OxladeFan

    Just remember, while your credit score is important, it actually exists to serve the interests of *lenders*, not borrowers. That means that sometimes having the highest score is not a reflection of a situation that is good for you. For example, my total amount of available credit is completely personally unsustainable were I to actually use all of it. I wouldn’t, of course, but lowering these ridiculous credit limits by closing any of my credit accounts actually *negatively* affects my credit score even though it would be safer for me to do so.

    Your desire to be ‘perfect’ in the realm of the credit score doesn’t necessarily equal the best option for you, although it will lead to being offered the best rates.

    • lucy00

      I agree. I have great credit. Not quite an 850 but still really desirable. But I don’t exactly have a surplus of excess cash and if I were to take out a loan, I’d be overextended. At a certain point it’s just a number and doesn’t equate to your self-worth.

  • KatMoss

    My DH & I have credit scores of 800+ and, while this may come as a shock to you, we don’t use a credit card regularly and, other than that one credit card which remains stashed only for travel purposes, the only other debt we have is our mortgage. As a side note, our home is valued well above what our mortgage balance is currently ($190K value to $124K balance) and our goal is to pay it off within the next 5-7 years. We paid off $125K in consumer debt; credit cards, a car loan, several IRS bills (shame on us for making so much money), and an attorney bill. Once we would pay off a credit card, we would (gasp) close it. Yep. We paid off & closed 14 credit cards, don’t use credit on a regular basis and STILL manage to have a credit score above 800. I think you’re chasing something that in the long run, really doesn’t matter.

  • DCLady

    Just signed up for Credit Karma. Not only is my score significantly lower than my last hard credit report (for apparently no reason), but I received a “C” for credit utilization – because the balance on my credit card is negligible compared to the limit. That’s the same as someone utilizing 60% of their credit card limit. Not pleased. Does not seem accurate.

    • jamasian

      I’ve found that any consumer report we find our scores will differ from what lenders see. Usually it’s a little higher though. Either way, they are not very accurate.

  • JenInBoston

    I sincerely hope the author would not actually use her 6-month emergency living fund to make unscheduled payments on a student loan, just to increase her already solid credit score. That would be a level of irresponsibility not in keeping with her efforts to-date.

  • Dama Dott.ssa

    I had to choose between being debt free & having a high credit score. When I paid off my house note, my score dropped below 800 for the first time.

  • http://www.taliashewrote.com thdpr

    I stopped caring about my credit score because my husband and I are paying down our debt and not planning to go into any more debt. We plan to pay for cars in cash and put more than 20% down on a house… we are saving hard so we don’t need credit in our lives.

    • rubymer

      The credit score will affect your mortgage APR… so maybe it would be good to work it up starting a year or two before you plan on buying. Having a low APR on your mortgage can save you thousands. I know it sucks to play the credit score game. I have the same problem as the author, my student loans are over the original borrowing amount due to interest accrued while in school.

      • http://www.taliashewrote.com thdpr

        Of course I care in general but I stopped obsessing about the issue. I have HUGE student loan debt that I have been working on for years and was living credit card payment to credit card payment. My husband got me in line when we got engaged and we are on a strict budget. I began a No Pants Dance ( http://taliashewrote.com/2012/05/22/no-pants-dance/ ) last year realizing I was bringing debt to my relationship and that my husband had very little. I also brought a crummy credit score. But I have been rehabbing it and we just refi-ed our home at a 2.5% interest rate.

        Perhaps I misspoke. I feel the author’s intense focus on only getting her credit score to 850 is misplaced. Rather, work hard to pay down the debt and minimize credit card usage. When you rehab your finances, your score (for the most part) will go up.

  • rubymer

    To the author: Credit Karma is highly unreliable. Mine tells me my credit score is 757 right now and I know 2 of my scores (Experian I know from applying for an auto refinance and Transunion I know from paying for the score) and they are about 50 points lower. You can’t buy a FICO Experian score anymore as a consumer, so the only 100% accurate way to see this one is to apply for credit with a lender that checks this agency’s score.

  • Bahtshevah

    I have a problem with the author’s impromptu lecture to to friend who funds his life with a debit card! That debit card is money earned not money owed (credit card). After I graduated from college several years ago, I was in credit card debt, paid it off and now I pay for everything cash! I bought my son a car for his birthday several years ago while he was in college. I also paid cash for a vehicle for myself a month prior to his vehicle purchase. Today, with enough savings, I am in the process of buying my first home, mortgage-free! So who needs credit or society equating my monetary worth to numbers! I am worth more than numbers in a computer or on paper! Know your worth! A quest for the perfect credit score only to get in debt and possibly lose your belongings, house, etc. is foolish! Remain debt-free! I applaud the friend who funds his life using debit cards more so than the author’s quest for a perfect credit score! A little anal if I must say so. She should also encourage her friend to take the mic, he has a better story.

    • aokimoonchild

      You’re confusing credit utilization with debt. It is very easy to use a credit card minimally every month (a twenty dollar purchase, for example) and pay off the purchase as you go along; with the new mobile payment apps it takes just seconds to pay your balance. This keeps your credit score up in case you ever need it in the future. Just using a debit card doesn’t benefit you this way.

  • www.Fishing4Deals.com

    I have applied for quite a few travel rewards credit cards recently to earn miles for free airplane flights. While each application dings my score by a few points, eventually, the score increases.