Wendy J. Fox was never that concerned about getting a perfect credit score. Yet in December 2019, just a month after she quit her full-time job, her score ticked up to a perfect 850.
Though FICO's scoring model doesn't officially count income as part of its algorithm, Fox was nonetheless surprised that such an achievement happened right after she stopped getting a steady paycheck.
Fox was making decent money as a freelance writer, but her income was definitely irregular. She was admittedly more focused on writing her next novel than earning steady pay. But in hindsight, freelancing may have helped Fox's score more than she realized.
Below, Fox shared with CNBC Select what her financial situation was like before achieving perfect credit, how irregular income may have helped boost her score and what she's learned since about FICO's scoring model.
Fox began with less-than-perfect credit
Fox's mother worked at a bank, so Fox knew from a young age how to maintain good credit and did so throughout most of her adult life — but it was never perfect.
"I knew a fair amount about FICO, and I've never been unbanked," Fox tells CNBC Select. "This is a mark of privilege in and of itself."
But like many college grads, Fox struggled with student loan and credit card debt early on in her career. After graduating with her MFA, she had about $26,000 in credit card debt and $30,000 in student loans. She first looked at her credit score in 2005, and she remembers it being under 600, which would have put her in the subprime credit category.
"I remember thinking, 'I would like to buy a house, but can I?'" says Fox.
For the next two years, Fox committed herself to learning the ins and outs of credit scoring so that she could qualify for an affordable mortgage without having to make a huge down payment. She used her single credit card for everyday spending and paid off the balance in full every month. This helped her establish a record of on-time payments and kept her total credit usage down. (These are the two biggest factors in achieving a good credit score).
By 2007, Fox's score wasn't perfect, but it was good enough so she could secure a mortgage to buy her first home, a townhouse in Seattle that proved to be a worthwhile investment.
Experts say a credit score of about 760 will get you all the same advantages as someone with a score in the 800s.
What improved Fox's credit score
Fox worked a corporate marketing job for most of her career, and she says that's one of the reason she was so financially stable. But even while working a full-time job, she was able write three books, including her latest novel, "If the Ice Had Held," a Buzzfeed top pick for 2019.
When she decided to take the plunge and go full-time freelance, she also made changes to her finances. And she thinks those changes might have helped her get a perfect credit score.
"My spending habits really changed," says Fox. "Sometimes, you are getting paid a lot and sometimes you are getting paid nothing,"
She's much more cautious about paying off her cards each month. Fox now pays off her card any time she makes a purchase and keeps her balance at almost $0.
"When you're freelancing, don't carry any credit card debt," she advises. "You don't know when your next paycheck is coming."
Another factor that probably helped Fox's score hit a new high is her credit history, which is the third most important factor for your FICO credit score. Unfortunately for millennials and Gen Z consumers, the only way to improve this piece of your score is to keep your oldest credit card open as long as it's not costing you.
One way young consumers can start building credit is to become an authorized user on someone else's credit card. If a close friend or family member is willing to put you on their account (and share the responsibility), this is an easy option.
Many issuers don't charge cardholders to add an authorized user to their account, including the Chase Sapphire Preferred® Card, the Capital One Venture Rewards Credit Card (see rates and fees), the Bank of America® Customized Cash Rewards credit card and the Citi Double Cash® Card (see rates and fees). But some premium credit cards — for example the Chase Sapphire Reserve® — do have an annual fee for authorized user.
If you don't have the option to be an authorized user, secured credit cards are the best way to build credit. You can later upgrade them to an unsecured card.
Why Fox argues FICO's scoring model is incomplete
Though Fox is happy to have a perfect credit score, she says that her story is a good example why your FICO score is just one measure of your overall financial health.
"I am sometimes supplementing [my spending] with savings," says Fox, noting that her FICO score has nothing to do with her net worth or how many assets she has in her name.
While your income level is not directly related to your credit score, Fox thinks it can have a major impact. "It is a lot easier to use less credit when you have a higher income," she says.
Likewise, Fox adds that if you are great at managing your finances, having a smaller salary doesn't have to mean a lower credit score. FICO only measures how well you manage credit, and there's much more to managing your money.
"I bet that there are people who are excellent money managers out there who use mostly cash, but that's not going to be reflected in a FICO score down the line, which is fundamentally unfair," she says.
And plenty of people who are debt-free and excellent at saving cash are actually credit invisible.
If you're in this situation, a new service called Experian Boost can help you improve your credit score by reporting your on-time rent, utility and internet payments to the credit bureau Experian. Average users see their FICO® Score 8 increase by 13 points, and many become scoreable for the first time.
So, while credit reports and credit scores aren't everything, Fox advises that credit newcomers understand how credit works and how to use it to your advantage.
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Information about the Bank of America® Customized Cash Rewards credit card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.
