For years I dreamed of achieving a perfect credit score. I imagined crossing over that elusive 799 line and joining the elite 800 credit score club. I would reap all the benefits of a credit score over 800.
I had grand visions of buying multiple rental homes for minimum down payments. Banks would just hand them over to me with the best mortgage rates possible. I’d have access to any credit card I wanted and they’d throw bonus travel points at me because they wanted me to have that card.
I imagined I could take out a personal loan to buy even more rental properties if I wanted. I’d skyrocket my passive income and jump on that financial independence train in no time.
The world was my oyster, so long as I had that perfect credit score.
Did I actually stop and ask myself what a perfect credit score really is? Nope.
I just assumed it had to be over 800, and the higher the better. My goal was 815. Not for any real reason, I just assumed it was even better than 800. Aim for the stars and at least you land on the moon, right?
Here is everything I did to finally achieve a credit score of 813.
Use debt strategically to increase credit
The very first thing I did to increase my credit score was take out a loan. Seems counterintuitive, right?
Keep in mind, I didn’t really have any debt. And building credit is all about demonstrating how responsible you are with managing and paying off your debt. So, I needed some debt.
I traded in my car, which I owned free and clear, and purchased a used car. Then, I put my car payments on autopay and never thought about them again until I sold the car.
At the time that I purchased my “new” used car, my credit score was somewhere in the low 700’s. I naively expected my credit score to jump right up a few dozen points. In reality, it barely did anything yet.
So, I bought more stuff on credit.
This is about where you think I’m nuts and that taking on debt is the last thing I should be doing. But, I figured that maybe the credit companies needed more information from me. Maybe I needed to demonstrate that I could use an auto loan and credit card debt responsibly.
I waited until the holidays when everything started going on sale. I found a great deal for a flat screen tv. Maybe not the giant 60” giant I had been lusting after, but a reasonable 35” that fit nicely in my small apartment. It was originally around $900 and I purchased it after Christmas for just under $500. (Keep in mind, this was a few years ago!) I signed up for a Best Buy credit card, which offered 0% interest for 12 months.
Then I calculated my monthly payments such that I paid the whole thing off within the 12 months, put payments on autopay and didn’t think about it again.
Regular use of credit cards
I used to just use my debit card for all my monthly expenses. Credit cards were for when you couldn’t afford anything, right?
Boy was I wrong.
I spent a good 12 months waiting for my credit score to rapidly approach perfect. Instead, it creeped up to around 750 and stayed there.
Then someone told me about cash back reward points. Wait, what? I can use my card and get a certain percentage back? Sign me up!
I found a credit card through my bank that provided 1-2% cash back on most purchases. I religiously used this card for all my monthly spending, then paid it off in full before the next billing cycle.
Every few months I would use my cash back balance towards my bill. It felt like free money!
Be aware of each billing cycle
After signing up for my new credit card, I waited to see a change in my score. Sadly, it never happened.
I waited a full year and my score barely changed.
Finally, I got fed up and called my bank. I asked them what I could do to increase my score.
After reviewing my payment history, I was informed that I was actually paying my bill too early.
Apparently, I wasn’t maintaining an account balance because I was paying my bill before the billing cycle. It looked to them like I was never using my card.
Request a credit limit increase
At the time of this phone call, my super helpful support agent also informed me that I qualified for an increase in my available credit limit. Clearly I had a lot to learn, this had never occurred to me.
I was advised that I can call once a year, sometimes sooner if something dramatic changed, like a new job or a raise, and request an increase.
The better your debt to available credit ratio, or credit utilization ratio, the better your FICO score.
Once I started waiting to pay my monthly balance and increasing my credit limits, my score finally started improving quickly.
Then, I made a mistake.
The importance of debt
I made the assumption that I only needed to carry debt long enough to demonstrate that I could pay it off responsibly. Meaning, I could now pay it off without penalty.
I used a bonus to payoff my remaining car payments early. I still had two years left on my auto loan and I wanted to pay it off and claim the title of being debt free.
My credit score dropped to 720 overnight!
But don’t worry, it didn’t stay there forever. I quickly brainstormed what else I could do to turn things around and get back up to the elusive 800 that I was chasing.
Add more credit cards for diversification
While my credit score went down significantly, it still wasn’t terrible. I decided it was time to explore the exciting world of travel rewards.
My boyfriend travels a lot for work and early on in the relationship, he asked me if I wanted to go with him to Italy. Of course I want to go to Italy! Except, how am I going to pay for this?
I signed up for the Chase Freedom Unlimited card and earned a sign on bonus. For just $200 I was able to purchase roundtrip airfare from San Francisco to Nice, France. I didn’t even use all my points!
I’ve since added a couple more cards from the Chase lineup. And now I travel a whole lot more than I used to.
Be sure to visit Intro to Travel Hacking: How I Booked a $980 Trip for Just $22 to learn how to utilize travel rewards points.
The benefits of having multiple cards is not only utilizing the various rewards opportunities, but I also dramatically increased my total available credit and lowered my debt to credit ratio. The more credit I have available to me, and the less I actually use, the better the credit score.
Interested in signing up for a travel rewards card? First, read the post linked above to be sure it’s right for you. Then, visit Chase to review their credit card lineup, or use my referral link for an extra $100 bonus.
Add a mortgage loan as a new form of debt
Not all debt is bad debt. Since the credit companies penalized me so harshly for getting rid of one form of debt, I figured it was time to add in another. It was time to buy a house.
Of course, it would have been nice to buy the house after I achieved my perfect credit score. But it was clear I wasn’t going to get the score without the house first.
I purchased a rental property and took on a conventional mortgage. Since it is a rental property, my interest rate is higher than average, but I made sure that rent more than covers both mortgage, taxes, insurance and all other expenses. So, it doesn’t bother me too much.
Then, I waited to see what that credit score would do.
Learn exactly how I was able to purchase a duplex for cash, fully rehab it, then refinance it for standard mortgage loan at How I Purchased my First Rental Property.
Finally, credit perfection
Apparently I had finally made all the right credit decisions. My score went from 720 to 813 in just over a year. It fluctuates occasionally, and I’ve learned that even if I pay my credit card bills in full every month, if I have a large purchase, and I carry it over to my monthly balance (instead of paying it off instantly), my debt to credit ratio will look higher than normal. And I’ll be penalized a few points.
But what is a perfect credit score anyway?
It turns out, no one seems to care if I’m at 813 or 800. They both count as perfect scores.
It isn’t actually that difficult to join the coveted 800+ credit score club. But it does take time, consistency, restraint and money management skills, as well as strategy.
These are key steps I learned during my journey to achieve a “perfect” credit score over 800:
- You need various forms of credit. But don’t just buy something for the sake of increasing your score. Make sure it is a purchase you will make anyway. Just try to gain an extra credit score boost from you larger, planned, purchases.
- Have a strategic plan. Slowly add various forms of credit and wait to see the impact before moving on to the next.
- Put ALL payments on autopay. This is so powerful. If you want perfect credit, you absolutely cannot miss a payment. Just put it on autopay and focus on other important personal finance tasks, like managing you budget and saving more money!
- Never purchase something you can’t afford. If you don’t have money in your account to cover that credit card purchase, don’t buy it. Credit is there as a tool, not free money you haven’t earned yet.
- Call your credit card company once a year and request a credit line increase. The higher the better, so long as you show restraint and don’t use it!
- During you call, also ask for suggestions on what you could do better and how you can increase your score. I have found customer support to be knowledgeable and helpful.
Did the banks throw mortgage loans at me once I crossed over the 799 credit score line? Not really. But I haven’t actually asked them yet. Maybe they will!
Where are you at in your credit journey and what moves are you making to increase your score? Leave a comment below and let us know!