If you have ever applied for a car loan, personal loan, etc. then chances are that you already know the importance of your credit score. It’s one of the most important things to care for if you want financial security and convenience. However, many people wonder what’s the highest possible credit score that you can achieve.
The Truth About the “Highest” Credit Score
It may come as a surprise, but there is no such thing as the highest credit score. This is because there is no standard scoring range that’s followed by all the credit rating companies. They all have different “lowest” and “highest” scores. For instance, a CIBIL score ranges from 300 to 900, while Equifax from 1 to 999. So, if a person has a CIBIL score of 900 then they have the highest score. However, if they have the same score as in the records of Equifax, they don’t have that achievement.
Although different credit rating agencies score on different ranges, they follow a similar credit report and score calculation format. In most cases, your credit score, irrespective of the credit rating agency, will be based on the following common elements which are given along with their approximate contribution to your score:
Repayment History — 35%
Your repayment history is the biggest factor that affects your credit score. So, if you never miss your credit card payments and EMI, then you can attain a high score. However, if you often make your payments late, then your score can take a massive damage.
Credit Utilization — 30%
If your credit report shows a history of maxed out credit cards, then you should expect a significant damage to your score. This is because high credit utilization is extremely bad for your score.
Ideally, you should use only as much as 35% of the credit available to you. So, even if your credit card limit is Rs. 1 lakh, you should put down only Rs. 35,000 worth of purchases on it.
Length of Credit History — 15%
Usually, the longer is your credit history, the higher is your score. This is the reason why individuals who have bank accounts and credit card accounts as old as 20-30 years are able to attain a really high score. You can also increase CIBIL score by never closing your old accounts.
Enquiries — 10%
Here inquiries mean the inquiries made by the banks and other financial institutions when you apply for a loan or a credit card. These are made to assess your creditworthiness, which plays a pivotal role in your application’s approval or rejection. For a high score, the number of inquiries should be limited.
Credit Variety — 10%
Banks like borrowers who have experience with all kinds of credit- credit cards, personal loans, mortgage, etc. So, if your credit history is comprised of a healthy credit variety, you can build a high score easily.
Lenders Want High Scores, not Perfect Score
Coming back to the idea of the “highest” credit score, as you now know there is no such thing like that as it’s relative. However, what’s more important is that you needn’t worry about achieving the highest score at all. This is because in most cases, it’s not worth it.
Banks just want high or satisfactory credit scores and not perfect scores. In fact, it’s extremely difficult to get a perfect score.
So, what you want to do is increase CIBIL score to a certain level and keep it that way. Since CIBIL considers any score equal or above 750 “satisfactory”, that’s what you should aim for.
Characteristics of the High Score Achievers:
The following are some of the most common things found among the high score builders which you can learn from:
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