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If you’re on a tight budget, a perfect credit score may seem like an unattainable goal. However, achieving an 800 credit score is possible without breaking the bank. In this post, I’ll walk you through how to get an 800 credit score.
Do you dream of having a perfect 800 credit score but feel like it’s out of reach on a tight budget? The good news is that you don’t need to break the bank to achieve this financial milestone.
Building a strong credit history takes effort and commitment, but it can be done with discipline and the right approach.
In this article, I’ll show you how to master the factors that affect your credit score, establish credit with a secured credit card and credit-builder loan, make on-time payments, keep your credit utilization low, and avoid common credit mistakes.
By following these steps, you’ll be on your way to building an excellent credit history and reaching a perfect 800 credit score, even on a tight budget. Let’s get started!
How to Get an 800 Credit Score
When looking at getting a better credit score 800 is often the goal. It’s not a perfect score but it does place you in the highest tier of FICO® Scores, which are used by most top lenders.
Only around 23% of all consumers have a credit score of 800 or higher. The average consumer credit score is 714.
I got my credit score over 800 several years ago and have been able to keep it there by doing the things I will talk about here in this article.
It won’t happen overnight so be patient but if you work through this list you will be on the way of joining the 23% that have a 800 credit score.
Understanding the Factors That Contribute to a Credit Score
One key aspect to achieving an excellent credit score is understanding the factors that contribute to it. The two major credit scoring models, FICO and VantageScore, both consider factors such as payment history, credit utilization, length of credit history, types of credit, and recent credit inquiries.
Payment history is the most important factor in determining your credit score, accounting for 35% of your FICO score and 40% of your VantageScore. Making on-time payments is crucial to maintaining a strong credit history. Late payments can stay on your credit report for up to seven years and negatively impact your score.
Credit utilization, or the amount of credit you’re currently using compared to your total available credit, is another important factor. Keeping your credit utilization under 30% of your available credit can help maintain a good score.
The length of your credit history also plays a role in your score. The longer you’ve had credit, the more favorable it looks to lenders. Opening new accounts can decrease the average age of your accounts, so it’s important to only open new accounts when necessary.
Having a diverse mix of credit types, such as credit cards, loans, and mortgages, can also positively impact your score. However, it’s important to only take on what you can afford and make payments on time.
Lastly, recent inquiries on your credit report can negatively impact your score. It’s important to only apply for credit when necessary and within a short period of time to limit the impact on your score.
Understanding these factors and taking steps to maintain a positive credit history can help you achieve an excellent credit score, even on a tight budget.
Using Credit Cards to Establish Credit
While it’s been trendy in some personal finance circles to ditch credit cards and only uses cash this can make it hard to build credit. It’s not something I recommend unless you just can’t handle using a credit card responsibly.
Using credit cards responsibly is an effective way to build good credit over time. Start by applying for a secured credit card, which requires a security deposit as collateral and is easier to get approved for than a traditional credit card.
Once you have the card, use it to make small purchases each month, and then pay off the balance in full and on time. This will demonstrate to lenders that you are responsible and capable of managing credit, which can improve your credit score over time.
Additionally, keep your credit utilization low by using no more than 30% of your credit limit at any given time. By consistently following these practices, you can build good credit and qualify for better loans and credit cards in the future.
Applying for a Credit-Builder Loan
Depending on how your credit is currently you may want to consider applying for a credit-builder loan after you have gotten your secured credit card.
This type of loan is specifically designed to help people build credit and is often offered by credit unions and community banks. By making on-time payments each month, you can demonstrate your creditworthiness and improve your credit score over time.
However, it’s important to carefully consider the terms and conditions of the loan before signing up, as some may have higher interest rates or fees. With a credit-builder loan in place, the next step is to focus on making on-time payments and keeping your credit utilization low.
Making On-Time Payments and Keeping Your Credit Utilization Low
By now, you know that establishing credit and keeping it in good standing is essential for achieving and maintaining a high credit score. One of the most important factors in building credit is making on-time payments.
Late payments can have a significant negative impact on your score, so it’s crucial to always pay your bills on time. Additionally, keeping your credit utilization low can also help improve your score.
This means keeping your balances low on credit cards and other revolving credit accounts. Aim to keep your utilization ratio below 30%, as anything higher can signal to lenders that you may be at risk of overspending and may be less likely to pay back what you owe. Remember, every little bit counts when it comes to improving your credit score.
Now that you have established a credit-builder loan and are making on-time payments, it’s important to avoid credit mistakes that can hurt your score.
Avoiding Credit Mistakes That Can Hurt Your Score
It’s easy to make mistakes when it comes to credit, especially when you’re on a tight budget. However, these mistakes can have a significant negative impact on your credit score. To avoid hurting your score, there are a few key things to keep in mind.
- Don’t Apply for Too Much Credit-Each time you apply for credit, it can leave a hard inquiry on your credit report, which can temporarily lower your score. Instead, space out your applications and only apply for the credit that you truly need.
- Be Cautious When Closing Credit Accounts– Closing an account can lower your available credit, which can increase your credit utilization ratio and potentially hurt your score. If you must close an account, aim to close newer accounts first, as this can have less of an impact on your credit history.
- Avoid Maxing Out Your Credit Cards– High balances on credit cards can hurt your credit score, even if you’re making on-time payments. Instead, keep your balances low and pay off your cards in full each month.
By avoiding these common credit mistakes, you can continue to improve your score and work towards achieving an 800 credit score on a tight budget.
In conclusion, achieving an 800 credit score may seem like an impossible feat on a tight budget, but with the right approach, it is within reach.
By understanding the factors that impact your score, establishing credit with a secured credit card, applying for a credit-builder loan, making timely payments, and avoiding credit mistakes, you can build an excellent credit history over time. Remember to regularly check your credit report and use credit wisely.
Get Peer Support for Finding Financial Freedom
You don’t have to do this alone. You can talk to others on the same journey as you and can help you brainstorm new ways to save money.
Join the free In Harmony with Money Facebook group! It’s a great place to learn more ways to reach financial independence and to connect with others on the same journey.
Looking for more resources to help you on your financial independence journey? Check out these other articles.