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How I Achieved The Perfect Credit Score – CNBC Make It

When I found out that I had an 850 FICO credit score, it was because I got an alert from one of the credit monitoring services that I use. Your credit health really is important. It really matters. I often tell people that having great credit is almost as good as having cash in the bank because you literally can do so much with a stellar credit rating that you might not even be able to do with money on hand. I feel like the world is my oyster, frankly, because I have a great credit rating.

My name is Lynnette Khalfani-Cox. I’m known as, The Money Coach, and I teach people about personal finances, how to get out of debt, how to save, and how to improve their credit ratings.

Believe it or not, I never once tried intentionally to achieve that magic elusive 850 credit score. I always was very cognizant of the fact that I wanted to be in a perfect credit scoring range, meaning, anywhere from 760 to 850. But the monitoring alert told me that my credit score had gone up and indeed that it had hit 850. And so I was like, oh, wow. Let me take a look at this. So I pushed the button, I opened it up, and I remember looking at it going, “Oh wow, 850. That is a really rare thing”. I really love having a great credit score because it’s afforded me a ton of financial benefits and frankly, a lot of peace of mind.

I always know that I’m going to get approved for anything that I seek on the credit front or any loans. If I need a mortgage or want a mortgage, I know I can get approved for one. Whenever I want a new credit card, I also know that I’m going to get approved for that if I apply for it as well. All of my credit card issuers, they’re constantly increasing our credit limits. I have a credit card that has almost a $50,000 credit limit.

So if I’m honest, in my early adult life, my credit was a hot mess financially. Frankly, right after I got out of college, I had a lot of student loans, I had in fact, even had my car repossessed when I was in college. I actually had a $100,000 in credit card debt alone. I know it sounds awful, don’t judge me, but it’s the truth. So I’m pretty sure that my credit score was somewhere in the 400 level.

I started doing one main thing, which was paying all my bills on time, every time without exception. A little bit of a turning point in terms of me really wanting to monitor, track, and improve my credit rating, it happened after I started digging myself out of debt. And it took me three years to pay off my credit card debt, but I saw something immediate that my credit scores jumped like almost a hundred points after I finally paid off my credit card bills. So that’s when I noticed, aha, there’s a really strong link here between how I’m handling the debt side of the equation, specifically the credit card bills, and my credit scores. Once I first tackled the debt problem and dug myself out of debt, I saw, oh wow, this is great. I’m able to not only be debt free and have more cash flow, but I’m also able to improve my credit score in a way that I had never previously done. And so, that gave me a lot of motivation and drive to constantly manage the debt side of things.

If you know the kind of magic formula and what’s involved, you can practice appropriate credit behaviors and make sure that you have a high FICO credit score as well in that 760 to 850 range. And it’s really about, number one, pay all your bills on time all the time, because 35% of your FICO credit score is based on your payment track record. Number two is, you want to have your debts as low as possible. Specifically your credit card debts. 30% of your FICO credit score is tied to your credit that you’re using. And then they’re going to look at things like the length of your credit history. That’s 15% of your credit score. The longer and more established your credit history is, the more that tends to boost your FICO credit score. And then the final two factors, 10% each. One of those 10% is the mix of credit that’s shown in your credit files.

So if you have, for example, a credit card, that’s a revolving form of debt, if you have an installment loan, like a student loan or an auto loan, that’s another type of credit. And then if you have something like a mortgage, having those three different types of credit, those loans in your credit file, when you show that you can responsibly juggle all those types of loans, you actually get kind of brownie points for that. And then the final 10% is really based on inquiries or new applications for credit. So I tell people all the time, don’t apply for credit unless you really and truly need it, because you don’t want to have a whole bunch of inquiries that are lowering your credit score unnecessarily.

A hard inquiry where you’re actually applying for a loan or for credit, it stays on your credit report for two years, and it counts against you for the purpose of your FICO score for 12 months. So I tell people, once you know the five primary factors that go into your credit score, your payment history, the amount of debt that you’re carrying, the length of your credit history, the mix of credit that’s found in your credit files, and the number of inquiries shown on your credit reports, you can manage your behaviors appropriately and you can achieve perfect credit too.

One final message I’d like to leave people with is really a sense of hope and inspiration when it comes to credit scores. I was a person who had a horrible credit score in the past, and frankly, it wasn’t even very long that it took me to turn things around financially. So I really hope that people don’t look at credit scores in the extreme like, bad credit, excellent credit, because that’s not the way to get ahead financially or from a credit perspective. It’s really about incremental improvement and progress. Don’t get discouraged, don’t give up. Don’t just kind of throw your hands up and go off, forget about it, because your credit health really is important. It really matters. Credit really serves as a crucial part of our financial system, and you don’t want to be locked out of that system.

Take 50% off Lynnette’s Perfect Credit Course available on Money Coach University. Use coupon code 850.