Do you want perfect credit? We recommend using only this amount of your total credit card limit.

FICO, the most commonly used credit scoring model in the United States, has a score range from 300 to 850. If your FICO® score is at or near 300, your chances of getting approved for a loan are very slim. However, if you have perfect credit, your chances of getting approved for a loan are very high. You’ll also likely enjoy competitive interest rates.

Now, there are a number of things you need to work on to get perfect credit. First of all, you need a flawless payment history. This means there are no late or missed payments on your credit history.

You will also need a solid credit history. If this is your first year holding a credit card or paying off a loan, this alone can prevent your credit score from being perfect.

But there’s another important step you need to take to achieve perfect credit, and that’s keeping your credit utilization ratio low. It’s not always that easy.

What is credit utilization ratio?

Credit utilization measures the total credit card limit you are using on various accounts simultaneously. If you have a spending limit of $10,000 across multiple credit cards and you have accumulated a balance of $2,000, your utilization rate would be 20%.

Generally, a credit utilization ratio of 30% or less is helpful for your credit score. However, if you want perfect credit, you’ll want to keep your ratio below 4.1%.

FICO found that the average consumer with perfect credit (a score of 850) has a credit utilization rate of 4.1%. So for context, if your credit limit is $10,000, that means your balance is limited to $410.

Easy Ways to Keep Your Credit Utilization Low

Regular credit card use, even if only temporarily, can increase your credit utilization ratio above 4.1%. This can make it difficult to get perfect credit. If this is important to you, one way to keep your credit utilization low is to request a credit limit increase every time your income increases. Credit card issuers want you to spend more, so they’re usually willing to do this as long as your account is in good standing.

Now that you have increased limits on certain cards, you need to remain disciplined and avoid the urge to spend more money. Not only will this lead to overutilization, but it may also put you in debt.

Don’t worry if you don’t have perfect credit

Keeping your credit card usage low can result in a credit score in the 850s if other factors also work in your favor. But perfect credit isn’t something you have to work on yourself to achieve.

Not only is this extremely difficult, but in most cases, once your credit score reaches 800, it doesn’t matter how high it is beyond that point. The loan options available with a score of 805 vs. 850 will be very similar.

However, it’s generally a good idea to keep your credit card balances as low as possible so you can pay them off in full before interest accrues. While it can be helpful to know that a low credit utilization ratio can boost your credit score, it can also indirectly save you money by reducing the likelihood of having to carry over balances.

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