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What Is A Credit Score? 10 Ways To Improve Ratings Report

This article originally appeared on the Motley Fool.

It’s the Holy Grail of all credit scores: 850. On the widely used FICO credit score scale, approximately one in every 200 people achieves perfection, at least as of a 2010 estimate by the Fair Isaac Corporation, the company behind the aforementioned FICO score.

The perks of having a perfect or even excellent credit score (think 750 or higher) are undeniable. It puts the ball completely in the corner of the consumer rather than the lender. You’ll often have lenders fighting for your business, and in nearly all instances, you’ll be offered the best interest rate by lenders, meaning you’ll have the lowest possible long-term mortgage and loan costs of any consumer.

So what does it take to achieve this Holy Grail of credit scores? As one of the lucky 1-in-200 with a perfect credit score, I’d opine not all that much. Yes, it takes some dedication, but there’s no secret club or shortcuts to achieving credit score perfection.

Here are 10 credit tips I’ll share with you that should help in your pursuit of an 850 credit score.

1. Pay your bills on time (and don’t be afraid to request a waiver if you’re late)

This probably goes without saying, but the most important factor of your FICO credit score is your payment history. Though FICO keeps its precise scoring formula a closely guarded secret, CreditCards.com has reported via FICO that about 35% of your score is derived from your payment history. If you have a number of late payments and/or collections, your credit score will take it on the chin.

Yet, even if you have an occasional late payment, it’s often worthwhile to request that your lender forgive a late payment (assuming you’ve made your payment and are now current on your account).

Most people aren’t perfect and we miss payments from time to time. Many years back, I was a day late with a credit card payment, but I had at least five years of consecutive on-time payments with the lender in question. I asked that the late fee and adverse credit ding be forgiven and the lender obliged. For lenders, it’s often cheaper to bend a bit with customers they’d like to hang onto than spend a lot trying to acquire new ones.

2. Set up as many automatic payments as possible

One of the best ways to reduce the possibility of a late payment and eliminate the “I forgot” excuse that proliferates throughout the industry is to set up as many automatic payments as possible for your credit accounts. Having your bills automatically deducted from your bank account on a specific date or charged to a credit card (assuming you pay it off monthly) ensures that you’re never late on your bills.

I’ve also found that paying bills through your bank online can be a particularly smart way to reduce your chances of being late with your payments. Not only do you avoid running the risk of your payment arriving and processing after the due date if you mail your bills in, but online banking is exceptionally quick and it makes recordkeeping very…

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