It’s time to get “Credit Fit”: How does your credit compare to the Perfect Credit Profile?

With thoughts of New Year’s Resolutions are racing around your mind like cars in the upcoming Daytona 500. Many people have a goal of getting in better shape physically, but how about getting in better shape financially? Most of us go through life believing certain myths about credit and we end up with our good credit scores through sheer luck. And when you end up with good credit from luck, without knowing why, it is very easy to fall from grace with the credit bureaus and you can see your good credit disappear. It doesn’t have to be this way. At CreditSense we have called on the expertise of renowned credit expert Merrill Chandler to learn exactly what it takes to create an 800+ credit score.

What does it take to create the “Perfect Credit Profile?”

The first question I want to address is one we hear repeatedly: Is there really a perfect credit profile? The answer is very simply yes. Your credit score is a mathematical calculation derived from the FICO algorithm—it measures patterns in your credit profile to determine how likely you are to pay back money that you borrow.

Credit scores can range from 350 to 850, depending on the version of the FICO scoring software that a credit bureau uses. An 800+ credit score has certain characteristics. If your credit profile has those characteristics, then you will have an 800+ credit score. It is just math and it is just that simple. The take home message here is that if you know what the characteristics are of an 800+ credit score, then you can control how to create one for yourself.

It takes time to reach an 800+ credit score. 

Think about it like this. What is your credit score now? How long did it take to get it? And, now we need to correct any errors or mistakes that you have made in creating your current score. If you are one of the millions of Americans who have bad credit, even terrible credit, it is going to take you more time to climb the ladder to great credit than someone who is starting out with good credit. If you have no credit, this is great information for you too. Better to build it right the first time than to build it and go back and take it apart, and have to build it again.

Your credit profile is made up of 6 distinct areas. We will take a look at each of these and tell you what it takes to make them an 800+ profile.

1. Your Credit Identity

A perfectly crafted personal credit identity has each of the following:

• A perfect profile has only one single name that is used for all creditors and lenders who report to the credit bureaus. The longer the single name has been used, the better. You want your name to be unique. This often requires the use of your full middle name. For example, if your name is John Smith there is a high probability that your credit data will be confused or merged with the credit data of one or many other John Smiths. When you have more than one version of your identity on your credit profile, the credit and underwriting scoring software causes a drop in points due to uncertainty. Better for you to use your full name John Jingleheimer Smith to create confidence in the bureaus that they are collecting, and reporting information on the right person. You also want to avoid variations of your name like: John J. Smith, J. Jingleheimer Smith, etc.
• A perfect profile has only one single address listed on your credit profile. The longer you are at a single address, the higher your credit and underwriting score will be. There are ways that you can maintain a single mailing address no matter where you live or how often you move. At CreditSense we discuss strategies for doing this in depth. Your goal is again, to create confidence in the bureaus that they have the right person.
• A perfect profile has only one phone number that allows creditors to contact you whenever they need. The longer that phone number has been in use, the better. Creditors want to know that they can contact you.  We have a great tip on how to do this at CreditSense.

​2. Your Revolving Account Portfolio

The ideal personal credit profile will have three to four credit cards reporting on your credit report while maintaining a 5% balance on each. To ensure that you are capitalizing on the most FICO score points available for each credit card you want to make sure that each of them is either a VISA or a MasterCard issued by a national bank. National bank VISAs and MasterCards are the only cards that receive the full scoring value from the FICO algorithm.

3. Your Installment Loan Portfolio

Installment loans are extensions of credit that have a set number of payments over a set time period. To create the ideal installment loan portfolio you want to have four to six installment loans open and be actively paying on them. The four to six loans should be comprised of at least one mortgage, one car, and two to four other installment loans of any kind.

4. Closed Account Portfolio

The perfect closed account portfolio has no revolving accounts. It also has numerous paid off installment loans that were paid on for at least two years.  Having many, many installment accounts with positive payment history in your closed account portfolio is what builds a resilient credit profile.

5. Inquiries

Anytime a creditor or lender pulls your credit it registers an inquiry on your credit report, known as a “hard pull.” The ideal credit profile has only one hard pull inquiry per year per credit bureau. This can be a very difficult task to accomplish especially if you don’t know what you are doing, so go to CreditSense.com to learn how to use inquiries intelligently.

6. Derogatory Accounts.

For the perfect credit profile it is very simple. Zero derogatory accounts. Don’t get discouraged if you have a derogatory or two, because there is still hope for you. You can still have an 800+ credit score with a negative listing or two reporting on your credit report. If possible avoid getting late pays and other derogatory marks. It will make your 800 credit score so much easier to obtain.

Your credit profile is a minefield. Be careful so you don’t blow it up! 

Little financial decisions you make every day create massive amounts of data points that the three credit bureaus (and credit aggregators like CoreLogic) use to provide lenders and creditors information on you. The data points they gather is what we call your credit “profile.” Every choice you make and every change that is made inside your credit profile has a direct affect on every other data point collected on you. You should know how a “simple” change you’re making today has an impact on everything else about your credit profile.

Remember, Don’t blow up your credit! If you have any questions, ask us on www.FaceBook/CreditSense we get you the help you need to have an 800+ credit score.

That is what it takes to have a perfect credit profile. Don’t be discouraged if you believe that you are a long way from this perfect profile. It took you a while to create an imperfect credit profile, so you are going to have to be patient as you re-create your credit profile into a perfect one.