How To Get A PERFECT Credit Score For $0

What's up guys, it's Graham here! So it finally happened, and we are celebrating today because for the last nine years, my credit score has never once surpassed the legendary eight hundred score. I got it once to seven ninety-nine, but it was just never able to break past it. That was until today! We did it! The credit overlords have bestowed their greatness upon thee, and my score has finally passed the eight hundred mark, which by the way, is a threshold in which most people would consider it to be a perfect score. This also means I could finally make a video about it on YouTube about how to get a perfect score.

So here's why all of this matters in the first place. Your credit score is really just a report card of how well you handle your money. Like in school, you'll do well on your exams and tests to get a good grade, but in life, you handle your money responsibly and get a good credit score. Having a good credit score isn't just something you look at online and then go and make videos about on YouTube, but you can do that, although it does have a pretty practical purpose where it could save you a lot of money. Even better, it could end up making you a lot of money. Having a good credit score means you can get the lowest interest rate anytime you want to leverage your money in real estate and business, or just in life. It's how I'm able to get thousands of dollars back and free closing costs anytime I refinance or buy a property. It's how I get such low interest rates anytime I go to buy something that it's effectively as though I'm just getting free money. It's also how I get approved for pretty much any credit card signup bonus I apply for, which is just another way that I get more free stuff.

So I promise, no, actually wait, I guarantee this video could easily save you or make you a few thousand dollars at minimum if you actually just follow it and do it. It's not gonna take you a lot of time; it's super easy to do, and the best part about all of this is that it's not going to cost you any money out of pocket to get an 800 score. So it's entirely free to do. Again, it's just gonna take a little bit of your time, and all I ask for in return is a quick like on the video to help with the YouTube algorithm. If you're feeling a little bit generous today, maybe just a comment down below to help boost it up too. So if you wouldn't mind, you just don't like and a comment, and that's it; otherwise, enjoy the video.

Now first, in order to understand how you can get a perfect score, you've got to understand how the system scores you in the first place. Just like you've got a class that grades you differently for homework, tests, assignments, attendance, and whether or not you actually smash the like button, your credit score grades you on several different factors as well. So if you want a perfect score, you have to do well on all of them.

First is your on-time payment history, and this makes up 35% of your credit score. Now this one is incredibly straightforward—just don't miss a credit card payment, and don't pay it off late ever. In order to get a perfect credit score, you'll need to pretty much never miss a payment; otherwise, that could ruin everything. Now here's how this works and how it's calculated: the credit gods look at all of your on-time payments and then divide that by your total payments, and then from that, they calculate what percentage you paid on time.

Now here's just an example: let's say you've had one credit card for 60 months, and you end up missing one payment. That means the credit overlords take 59 on-time payments, divide that by 60 total payments, and you have a ninety-eight point three percent payment ratio. As you could see from the Credit Karma score calculator, that puts you in the yellow, which is not good. That is unacceptable if you want to get a perfect score.

However, in a different example, let's say you've now had two credit cards each for sixty months, and you end up missing one payment. Well, now you have a total of 120 credit payments between two credit cards, which means that they take 119 on-time payments, divide that by 120 total payments between the two cards, and that means you've paid 99.1% on time, which puts you in the green category as far as Credit Karma is concerned. That is a little bit better.

And one more example: let's just say you're brand new to building credit. You have one credit card; you've had it for fifteen months, and you end up missing one payment. Well, the same calculation still applies. You have fourteen on-time payments, divide that by 15 total payments, and that means you've only paid 93.3% on time, which is bad. That's really bad. It's in the red, according to Credit Karma, which means you can't pass go; you can't collect $200, and you got to go right to jail. It's that bad. But that also means that you could prevent this from happening by not only just not missing a payment in the first place, but also having more credit available to you for a longer period of time, so that that way, if you do miss a payment, it does end up impacting you a lot less.

Like having 10 credit cards open for five years would give you 600 total payments, so that if you end up missing one by mistake, it still means you've paid 99.8% on time, which is not the end of the world. Now when it comes to paying off a credit card on time, the really good news with this is that for them to count it as an on-time payment, you just have to make the minimum payment every single month, which most of the time is really just like twenty-five to fifty dollars a month. So even in the worst case scenario, if you can't afford to pay off your credit card bill in full, just make the minimum payment on time every single month, and that will help keep your score intact in this category, which like I said, all of this is the most important part of your score, making up thirty-five percent of what it is; just ask Dave Ramsey.

Besides that, the second factor that makes up your credit score is known as what's called the credit utilization, which makes up 30% of your score. Now in order to get a perfect score, the credit bureaus just want to see that you're not out there just maxing out all of your credit cards and that you're only using a small percentage of the overall credit that you have available to you. Ideally, you want to be spending under ten percent of your total credit limits, showing the almighty credit gods that you don't need all the money they've given you because you're that good with money.

Now if you're confused, here's how this works and here's how it's calculated. Let's just say you have a credit card with a ten thousand dollar limit, and you go out there and spend six thousand dollars. After that, you just go and make the minimum payment. Well at that point, you do the calculation, and you're using 60% of the available credit you have, which puts you in the red category here, which is bad. From that, you're seen as a riskier borrower because you're carrying a higher balance, and that makes the credit bureaus very angry, and they're gonna lower your score.

On the other hand, if you have the same one credit card with a ten thousand dollar limit, you spend six thousand dollars, but you pay it off in full when it's due, that means you now have zero dollars on a ten thousand dollar credit line, which shows that you have a zero percent credit utilization, which makes the credit bureaus very happy and gives you a green category.

Now there are some ways around this because it's not the dollar amount that the almighty credit gods care about; it is the percentage of credit that you actually use. This means if you have a three hundred dollar credit line and you go out and spend $300, that just means you've maxed out your card. You have a 100% credit utilization, and that's very bad. But if you go and spend that same $300, although this time you have a $30,000 credit line, then that's showing that you only have a 1% credit utilization, which is really good.

Now, one of the techniques I use to help with this is just to have a lot of available credit with all really high limits. For instance, right now, I have over 12 credit cards, and many of them have over $30,000 credit lines. Now, I'm never ever ever actually going to spend that much money, but it does help me in the instance where I go and spend $10,000 or more on a home remodeling budget, and I can still show a very low credit utilization because I have so much credit already available to me.

Now there is a myth out there that suggests you should keep a small balance on your credit card at the end of every month. This way, the credit bureaus have something to report. This one is false; keeping a balance on a credit card is not going to help improve your score and, if anything, it's going to cost you more money in interest. So it's always better to pay it off in full by the time it's due and never carry a balance on the credit card ever.

So for you watching, if you want to get a perfect credit score, it's really important that you try to keep a balance of 5% or less of your available credit. It doesn't mean that you can't go out there and spend more than 5% of your available credit, but it does mean that you should pay it down before the statement cycle is over, so that way, the credit bureaus have less money to report on.

Now in addition to that, it will help you to go and get more credit cards, as counterintuitive as that is to say because that will help increase the total credit limit you have available to you, which will decrease your overall credit utilization. Finally, I strongly recommend you ask for a credit limit increase every 6 to 12 months on your credit cards. This way, you’re gonna be constantly lowering your overall credit utilization and helping to improve your score.

So just remember, don't go out there spending more money just because you have more credit available to you. I think that goes without saying. All of this should really be done as a tactic to help increase your credit score and not go out there to buy more things you don't need, like this really cool pinball machine from eBay.

And finally, one more note I want to leave off with this: how much money you keep as a balance on a credit card is really only going to be temporary. This is one of those things that's only going to impact your score until you pay down your credit card, and then your score will end up going up afterwards. So if you have a high utilization rate right now, or in the short term, it's not the end of the world, and your credit score will rebound as soon as you pay it down.

Third, they say that length doesn't matter, but when it comes to calculating your credit score, it very much does because 15% of your overall credit score is made up by the average length of your credit history. This just means the longer you've had credit for, and the sooner you start, the better. This is one of the reasons I highly recommend people build their credit as soon as they possibly can, even if it means going and getting a credit card the day you turn 18. This will build the entire foundation of your credit history very early on.

Now it's very important for me to distinguish here that this is calculated by the average length of your total credit history and not the total length. Let me explain: let's say you opened one credit card four years ago. That means your average credit history shows as four years. But if you opened up that one credit card four years ago, and then you opened up another new credit card today, your average credit history would be reduced now to two years—remember because it only takes the average.

The same also applies if you end up closing an old credit line because some people believe it's a good idea just to close old credit cards they don't use anymore. This could be really bad because once you close off an old credit card, even though it'll still show in your account for seven to ten years, it could lower the average age of your accounts after that, and then you would have to wait even longer to build that back up.

So my recommendation is to first start building your credit as soon as you possibly can, and keep all of those accounts in good standing as long as possible. This is gonna help you build up a solid fortress of long-standing credit history, so that when you do go and apply for new credit, it's not going to impact your account as much since you have a lot of long-standing credit history already. Because of all of that, it's going to reduce your score a lot less, and when it comes to doing all of this, really the only thing you could do at this point is just wait. This part of building your credit just takes time, so don't be impatient. If you've just got a credit card and made a few on-time payments and don't yet have a seventy-six score, patience goes a long way with this one, so sometimes you're just gonna need to wait this one out.

In terms of how long you'll need to wait, according to the Credit Karma guide, they want you to have nine years or more of average credit history to get the best ranking. Even for me, my average account length shows just over four years because of all of the new credit I've taken out recently, and still, it doesn't make a huge difference because it only makes up 15% of your total credit score, and I've done every other category very well.

The fourth aspect of your credit score is how many lines of credit you have open, and this makes up 10% of your score. Now this is one of those things that you would think makes absolutely no sense. Like why would you go and reward someone for going and opening up more credit cards and taking out more loans? You would think that the person who doesn't really need any credit and doesn't have much would have the highest score, right? But if you think that way, you would be wrong, and here's why.

At first, the more credit you have, the higher your credit limit will be, which means the lower your overall credit utilization is likely to be, which means the higher the score you will have, if that makes sense. The second, by having more credit available, you're gonna be able to show more on-time payments, which like I said, is going to help increase your score as well. Third, having a mix of credit—like having a mortgage, an auto loan, and a credit card—shows lenders that you can responsibly handle different types of debt without defaulting on them.

All of this sounds like pretty backwards thinking, and a lot of it reminds me of the mindset of "we're only going to loan people money who don't need money because they're the most likely to pay us back." By the way, that is very true; banks love lending you money when you don't need it, and as soon as you do need the money, you're seen as a higher risk because you need it. So really, this is just something you need to play into; it's how the system works. According to Credit Karma, they want to see you with 21 lines of credit or more to have the perfect score, and for most people, I have a feeling this is gonna take you a very long time to build up to. But I wouldn't stress about it too much; it only makes up 10% of your score, although I would recommend you aim to diversify your credit profile over time because long term, that is going to help you get an 800 plus credit score.

And finally, fifth, we have the last component of your credit score, which makes up the remaining 10%. That would be the total amount of inquiries on your credit report. Now here's how this one works: any time you go and apply for new credit, it's reported to the credit bureaus and shows up on your report as what's called a hard inquiry. This helps lenders keep track of how many times you're going and asking for credit, and generally speaking, the more times you're going and asking for credit, the riskier you become as a borrower. This is because lenders are worried that all of a sudden you're out there going and applying for new credit cards and loans, and they're concerned that maybe something has happened that is causing you to do this—like thinking, why did you just get three credit cards and an auto loan today? Are you running out of money? Are you going to all of a sudden max it out and then never pay it again? This all seems worrisome to lenders, so therefore the more hard inquiries you have on your credit report, the lower your score is generally going to be.

Now in addition to that, if you're out there getting new credit cards and getting new loans, that is going to reduce your average credit length history, which could end up further dropping your score as well. That's why so many people end up telling me that they've just opened up a new credit card, and then all of a sudden, their score drops by like 50 points. So no, it was not just the inquiry that did that; it was also the reduction in your total average length of credit history that impacted your score as well. The inquiry was really only a small component of that.

The good news, however, is that all of this is really just a temporary thing because hard inquiries only show on your report for the first two years, and they only impact your score for the first twelve months. Then after that, they drop off your report, and it's like it never even happened in the first place. The other good news with this is that if you're shopping around for an auto loan or a mortgage, and you'll need to run your credit multiple times with different lenders to get different rates, the FICO scoring method will generally just group all of those inquiries together as one, and therefore it's only going to impact you as if you ran your credit score once. This way, you can go to five different lenders for a mortgage, have them all run your credit five times, and it's only going to count as you running it once, of course, as long as you do it within a relatively short period of time, within just a few weeks of one another. This is to promote rate shopping for you as the customer without penalizing you with your credit score, but again this only makes up 10% of your overall credit score, so it's pretty minimal.

But ideally, if you're gonna want the Credit Karma green score, they want you to have zero hard inquiries in the last twelve months. Now realistically, I think having zero inquiries in the last twelve months is rather ridiculous, especially if you're out there going and getting like credit cards and getting bonus points and all that sort of stuff. So I think as long as you keep it to a minimum and are rather selective about the new credit you get, you should be fine. And also, if you're in the process of going and building up your credit, it's probably best you go and take out a lot of credit now while you still can. So then that way, by the time you actually need a good credit score, all of this hard inquiries will have dropped off your report anyway.

This is exactly what I ended up doing. I took out a whole bunch of credit as early as I possibly could when I knew I was still building up my score, so that that way, two years later, I knew when I would need the credit score, it wouldn't have mattered anyway.

Then once you've done all of the above, I have a few final recommendations. First, I would highly recommend you check your credit score every few weeks using a free service like Credit Karma, or another really great one is Credit Sesame. Both are really fantastic resources that update your credit score every week or so, and even though it's not going to be exact and it's not going to use the exact FICO scoring method, it's still going to be pretty close and will give you a great representation of how you're doing credit score-wise.

Second, you could try a technique to increase your credit score known as credit piggybacking. Now this is where you become an authorized user on a credit card from someone who has a very extensive credit history. Now when you do that, their credit history could report on your credit account as well, and that might increase your credit score a lot in the short term. You know, it's very important to note that not all credit card companies will do this, and the FICO scoring method has been cracking down on people trying to do this to boost up their scores artificially. But I wanted to mention this because this is something that can work depending on your situation and how it's done.

No, I personally think it's probably better you just build up your own credit reports on your own, and that way, you have it with you no matter what. You don't have to worry about any of this stuff, but I think if you're a parent and you want to help out your child, look into doing this, and you could help them out immensely in terms of building up their credit score just by going and doing this one little trick.

And lastly, following everything in this video, staying consistent with it, and keeping very precise with how you manage your credit will end up helping you get a perfect score and end up saving you a lot of money and making you a lot of money. No way will I admit having a score above 760 or so is not going to make a huge difference, like having an 810 credit score is not going to give you a lower rate anytime you go and get a house as someone else with a 785 score. Honestly, anything above 800 is really just for bragging rights at that point. So really, you should aim to keep your score anywhere above 760 to 780, and that will help make you the most amount of money, get you the lowest interest rates, and get you to smash the like button for the YouTube algorithm if you have not done that already!

So with that said, you guys, thank you so much for watching. I really appreciate it! As always, if you guys enjoy videos like this, make sure to subscribe and hit the notification bell so YouTube notifies you anytime I post a new video. Also, feel free to add me on Instagram; I post there pretty much daily, so if you want to follow me there, feel free to follow me there. And then lastly, you guys, want free stocks? Use the Weibo link in the description, and when you deposit $100, they're gonna be giving you 2 free stocks, and one of those stocks is going to be valued up to $1,000. So my recommendation, if you want free stocks, just go and deposit 100 bucks, get the two free stocks, get a pretty immediate return on your money, and then afterwards, if you want to use them for stock trading, they're great to know; otherwise, just go and cash out.

Oh, one more thing: go and add me on my second channel, The Graham Stephan Show. I post there every single day I'm not posting here, so if you want to see a brand new video from me every single day, go ahead and add me on that. Thank you again for watching, and until next time!