How the 1.5% of Americans With Perfect Credit Do It
Quick question. What number defines you? Is
it your age? Those lotto digits you just know will pay off someday? Maybe you think there’s no number that defines
you. But corporate America disagrees. Industry defines you with three digits, your credit
score, and it influences everything from how much you’ll pay to borrow money to whether
you can buy a cellphone, land a job, or rent an apartment.
It’s not easy to make sense of your finances. I’m Shahien Nasiripour and I want to meet
people with an obsession to beat the system and never leave money on the table. It’s become such a popular measure of character
that there’s a dating service that matches people off of it. Maybe it’s not for you.
It’s definitely not for me. Around 200 million Americans have FICO scores, but only about
1.5% of them have that perfect 850 number. One of the folks who knows how to join the
850 club is Stan Kellman. He learned to game a system after his score fell below 600 during
the Great Recession. Let’s give him a ring and find out how he did it.
Hey, Stan, thanks so much for taking the time to chat.
Thank you for having me. What moved you to want to achieve an 850 credit
score? I just happened to have the misfortune of
graduating with my MBA in the recession and got into some debt. In the process of settling
that debt, my credit score dropped. What it’s like to live with a low score, it really sucks.
If you have a mark on your credit report, it will not go away for seven years, for 10
if you have a bankruptcy. You mentioned that you had negotiated with
your creditors. How did you go about doing that?
You’ll get daily collection calls and they’ll want you to make a payment. What you don’t
realize is once you make a payment, your clock gets reset. By law, after 180 days of nonpayment
is when they are required to write it off for accounting purposes, and right before
the 180 day mark is when you can call them and make a deal.
I could settle some cards for as low as 20 cents on the dollar. You are not paying back
what you promised to pay back, but at the same time, there are big banks that got billions
of dollars from the government in bailout funds and I didn’t. So that was my own
personal bailout. Why didn’t you just stop when you got to 780?
Why did you try to get that elusive 850? Because that’s my personality. I wanted my
perfect score. The scores are not developed for you. They’re developed for the banks to
evaluate your credit worthness. They’re not a measure of your personal financial health.
You can be deep in debt and have a perfect score, and that’s not good for you. And it’s
better to have a middling score, but have no debt.
Let’s look at how these credit scores are weighted. Peoples with perfect 850 scores
never make late payments. The 850ers use maybe 5% of the big credit limit and have had a
diverse mix of loans and card accounts over the years. They also haven’t applied for any
new credit recently. It’s not the fairest system, but you really
don’t need to be perfect to get it to work for you. Wisebread.com founder, Janet Alvarez,
raised her score 300 points, and she’s got tips on how to raise your score and keep it
there. In order to get the perfect 850 or 860 credit
score, it’s going to take sort of impeccable performance on every aspect of your credit.
But you don’t really need it. You don’t need a perfect score to get the best rates or the
best offers. You just need a really good score. Younger people are inadvertently penalized
because if you’re younger, you’re just not going to have a lot of credit history and
to get the maximum boost out of this component of your credit score, you’re going to want
a credit history of 30 years or longer. Even if your credit isn’t great, if you do qualify
for more credit, ask for higher credit limits on your existing cards or try to get new cards.
Again, that improves your credit utilization ratio so that opens your score. It can boost
it by something like 50 to 100 points within a month, depending on how much additional
credit you take on. There’s a different score generated for the
type of loan or the type of credit you’re seeking, so for the purposes of credit cards
or a car loan or a home loan, you might get different scores, and that’s just because
they’re looking at different selection criteria based on what you’re borrowing for.
So get to work on your score. Give yourself some credit along the way.