Want a Perfect Credit Score? Here's the First Thing You Should Do

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An estimated 1.54% of Americans have a perfect 850 credit score, says Experian. And there are many benefits to achieving a perfect credit score.

With perfect credit, there's a great chance you'll get approved for new credit cards or loans when you apply. And if you're borrowing a large sum of money, like an auto loan or mortgage, a perfect credit score could land you a competitive interest rate, making your monthly payments less expensive for many years.

But there's a reason only 1.54% of consumers have perfect credit -- it's not an easy goal to achieve. If you're close to perfect credit but not quite there, chances are, you're already in the habit of paying your bills on time and keeping credit card balances low. (And if not, these habits are important if you want to get your score to be as high as possible).

But there's one step you may not be taking on the road to perfect credit. And failing to take it could be standing in the way of that 850.

You must check your credit report for errors

Would it shock you to learn that about 20% of consumer credit reports contain at least one error? You may be surprised at that level of inaccuracy, but it's true. For this reason, if you want perfect credit, it's extremely important to check your credit report for errors every few months and report mistakes that have the potential to lower your credit score.

Here are some credit report mistakes that could have a negative impact on your credit score:

• A debt listed as delinquent that you paid on time

• A debt listed as delinquent that was never your debt to begin with

• A few recent hard inquiries for loan or credit card applications you never made

• A long-standing credit account that's listed as closed but is still open

Why do these mistakes happen? It's hard to know. One possibility is that if someone with a similar name to you is late paying a bill, that delinquency might accidentally get reported on your account instead of theirs. Other times, the error is just random.

And of course, some of the time, the reason for one of the errors above is that the information is actually true -- meaning, someone has stolen your Social Security number and applied for new accounts in your name, or opened an account and didn't pay.

So either way, it's important to check your credit report every few months. And since you're entitled to a free copy every week from each of the three credit bureaus -- Experian, Equifax, and TransUnion -- via AnnualCreditReport.com, you have plenty of opportunity to do so without spending money of your own.

If you spot an error on your credit report, contact the bureau in question and see if you can resolve it. If, for example, you have a debt listed as delinquent that's current, you can potentially show proof of a loan payment or an account statement showing you're current to get that issue resolved. Similarly, for an account listed as closed that's actually still open, providing a current statement might resolve the issue.

Fraudulent activity is a harder one. You'll need to work with the loan or credit card issuer to prove that you weren't the one who opened the account. You may then also need to freeze your credit and take other steps to protect yourself.

But even then, the problem is solvable. And from there, getting a black mark removed from your credit report could lead to perfect credit.

Do you actually need perfect credit?

It's OK to want perfect credit as a matter of pride. Whether you need it for borrowing purposes is a bit of a different story.

The truth is that once your credit score reaches 800 or higher, it almost doesn't matter if that number is a perfect 850 or a little bit lower. Put another way, if you qualify for a loan or credit card based on factors like your income and existing debt, you're likely to get approved regardless of whether your credit score is an 812, an 825, or an 850.

For this reason, it's a bit silly to stress yourself out over perfect credit since it's pretty hard to achieve. Something as innocent as a new credit card application could drive your score down by a few points, keeping that 850 out of reach.

But if you're intent on reaching an 850 credit score, keep paying bills on time, keep your credit card balances as low as possible, and keep long-standing accounts open. But also, check your credit reports every few months and take action if something on them doesn't look right.

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