Unlocking the Benefits of a Perfect Credit Score: What to Do Once You Reach 850
Upgrade Your Credit Card
If you’ve been using the same credit card for years, it may be time to consider an upgrade. While your current card might still serve you well, a higher credit score allows you to apply confidently for cards that offer better rewards and features tailored to your spending habits. With your 850 score, you’ll likely qualify for premium cards with perks such as cash back, travel rewards, and low interest rates. Explore our top recommendations for the best credit cards to make the most of your newfound credit prowess.
Refinance High-Interest Debt
If you’re still carrying high-interest debt, now is the perfect time to refinance. You may have taken on loans when your credit history was shorter or your score was lower, leading to less favorable rates. A perfect credit score opens the door to consolidation loans with significantly lower interest rates, allowing you to save money over time. Here’s how consolidation loans work:
- Assess Your Debt: Add up all high-interest debts, from credit cards to payday loans.
- Apply for a Consolidation Loan: Seek a loan large enough to pay off these debts.
- Direct Payments: The lender will deposit a check into your bank account or pay off your old creditors directly.
- Simplify Your Payments: Instead of managing multiple debts, you’ll have one lower-interest loan to focus on.
Alternatively, consider a balance transfer credit card. These cards often come with 0% introductory rates for a promotional period, making them an excellent option for saving on interest.
Make a Major Purchase
With your credit score at its peak, it’s an ideal time to make significant purchases. Lenders typically reserve the best interest rates for highly qualified borrowers, meaning your 850 score will likely secure you exceptional financing options. For instance, imagine two individuals purchasing the same car. With a credit score of 650, one borrower might face a 9.75% interest rate, while another with a perfect score of 850 could qualify for just 7%. Here’s how their payments would differ:
| Borrower | Annual Percentage Rate (APR) | Monthly Payment | Total Interest Paid |
|---|---|---|---|
| Taylor | 9.75% | $757 | $6,349 |
| Cameron | 7.00% | $718 | $4,483 |
While Taylor’s monthly payment is only $39 higher than Cameron’s, over four years, he pays an extra $1,866 in interest. That’s money that could have gone towards other expenses or savings.
Maintain Your Perfect Score
Reaching a perfect credit score is an achievement that requires diligence. To keep your score intact, implement these essential strategies:
- Pay Bills on Time: Consistently making payments by their due date is crucial.
- Control Your Debt: Avoid accumulating excessive debt; pay off any new loans promptly.
- Limit New Credit Applications: Be selective about applying for new credit to prevent score dips.
- Keep Old Accounts Open: Maintain credit accounts even if you don’t use them frequently; this can enhance your credit history.
- Regularly Review Your Credit Report: Check your credit report annually through AnnualCreditReport.com to catch any errors or discrepancies.
- Think Twice Before Co-Signing: Be cautious about co-signing loans or allowing others to use your credit accounts, as this can impact your score.
Reaching an 850 credit score is a significant accomplishment that can open doors to numerous financial advantages. Whether you’re looking to refinance debt, upgrade your credit card, or make a major purchase, a perfect score empowers you to make smarter financial decisions that can benefit you for years to come.
