Credit agencies such as Standard & Poor's, Moody's and Fitch use ratings to indicate the financial health of the companies they analyze. An "A-1" rating is an indication that a corporation is financially sound and has adequate cash reserves. Consumer credit agencies don't assign A-1 ratings. They assign a numerical score called a FICO score, which is based on how well you manage your debt. The highest score consumers can achieve is 850. Only one out of every 200 Americans holds this perfect credit score. If you have designs on joining them, you'll need to work to keep your financial house in order.
Check Credit File
Order copies of your consumer credit files from the three major credit bureaus: Equifax, TransUnion and Experian. Go through your reports carefully looking for errors that could have a negative impact on your FICO score. If you identify any incorrect entries, contact the bureau concerned. Erroneous adverse information on your file will not help you in your efforts to achieve a perfect credit score.
Clear Arrears
You'll have a long way to go in your quest for perfect credit if you're behind with any payments to your creditors. Clear any arrears you have outstanding and set up direct debits to automatically pay your bills when they're due.
Debt Ratio
Use as little of your available credit as possible. Make regular use of your credit facilities but don't carry a balance on your cards. As well as saving you from paying interest, paying your full balance keeps your credit utilization ratio low. This is the amount of your available credit you use. You should never use more than 10 percent of your available credit, according to NASDAQ. If you have $50,000 of credit at your disposal, you should not owe more than $5,000 to keep your score high.
Debt Age
Keep old lines of credit open. Some 15 percent of your FICO score is based on the age of your credit accounts. Think twice before cancelling old credit or store cards you never use, even if they charge a ridiculously high rate of interest. Keeping these open could boost your score.
Credit Applications
Refrain from making multiple applications for new credit. You'll be better off not pursuing any new credit at all after you have at least one credit card, a home loan, a student loan and a car loan on your file. An application for credit can hurt your score for six months or more, according to NASDAQ.
