A run of 10 points from the last seven games - and just one defeat - ensured Wolves did not make a quickfire return to the Championship.
McCarthy, whose side shared a 1-1 draw at home to Blackburn on Saturday, said: "I've always had a sense that we could finish above three other teams.
"I am immensely proud of the way the players have gone about things because of the way they have played and competed, the way they have gone about their jobs.
"Everyone has put a right shift in and the pride I feel can only be outwardly shown now a little bit more now that we are staying in the league.
"Even when we've been beaten, I've not come away and thought 'I don't admire the lads' because they've been terrific in getting us into the Premier League and competing to stay in it."
McCarthy believes his squad have improved as the season has progressed despite containing little Premier League experience.
He said: "You have got to improve if you are in it, physically, technically, mentally, emotionally, all of those things you actually get better at.
"We have done that. We came into the season with little Premier League experience. People like Marcus Hahnemann and Kevin Doyle at Reading and David Jones a bit at Derby had it but no-one else really.
"They have got better, they have matured, they believe in themselves and believe they can play in the Premier League and not just be hanging on for survival.
"They have actually competed against teams who are supposedly better than us and got points. Self belief is a wonderful thing."
McCarthy knows that team spirit has also been a key component in Wolves surviving the drop and bouncing back when the going has been tough.
He said: "The team spirit is something I work at anyway. I haven't had a team that's ever lacked that.
"Even at Sunderland when we were bottom of the table, the players weren't up in arms or jumping about cribbing about things.
"There was still a good team spirit and they were fine. But I do like that kind of player and I think everyone does."
Another crucial factor in Wolves managing to stay clear of relegation was McCarthy's decision in mid-season to revert from a 4-4-2 to a 4-5-1 formation.
He said: "It was clear to me halfway through the season that we weren't going to score a load of goals so it was important that we stopped leaking them. Fortunately we have.
"We've managed to get a few clean sheets and have become harder to beat. We've been trying to do it all season long but the change in formation has certainly helped.
"If you are organised, all the players know their jobs, understand what role they've got, do that to the best of their ability, have a back four that is well-drilled and is a cohesive unit, then you have a chance."
McCarthy also acknowledges the fact Wolves have a stable position off the pitch compared to Portsmouth's financial problems and West Han's mid-season change of ownership as being a crucial factor.
He said: "You like to have a relationship which is stable and your working life is just the same.
"We turn up and we've got no problems with the board, no problems with administration, no problems financially and we can concentrate on football."