A strong credit score can have a powerful impact on your financial life: it influences your ability to get a credit card, finance a car, get a mortgage, and possibly to rent an apartment. The higher your score, the more easily you’ll qualify for loans, other lines of credit, and lower interest rates. But does that mean your goal should be to achieve an absolute perfect credit score? The answer might surprise you.
What is a perfect score?
For the VantageScore 3.0 and FICO 8, the two most common credit scoring models used to measure a consumer’s credit risk, credit scores range from 300 to 850. Roughly, scores ranging from 300 to 629 are considered bad, 630 to 689 are fair, 690 to 719 are good, and 720 to 850 are excellent. Believe it or not, according to a recent study by Experian (one of the three credit reporting bureaus), there are Americans with a perfect score of 850! Although not many—at the time of the study, only 1.2% of all FICO scores in the U.S. stood at 850.
How do you get to 850?
In general, to reach that top tier, you will need to make on-time bill, credit card, and loan payments; have a high credit card capacity but low credit utilization (meaning your credit limit is high, but you only use a small fraction of that available credit); have a long credit history; utilize a mix of credit (credit cards, auto loan, etc.); and not have many new credit inquiries.
Beyond this, Experian found that top score holders have similar credit habits. They have access to a greater number of credit products but carry less debt than average FICO score holders, thus decreasing their credit utilization. They manage a greater number of credit cards without adding to their consumer credit card debt.
Importantly, while access to some credit products can be limited by income, your paycheck isn’t a direct barrier to achieving a perfect FICO score.
What does a perfect score get you?
The great news is, you don’t need a perfect score to access top tier loan and credit card rates and benefits. Many lenders won’t distinguish between scores in the range of 800 to 850, and a score above 760 will earn you the best interest rates. With credit cards, having a score of 800 to 850 can earn you additional rewards, like new account bonuses, more earned rewards, and other perks.
Now, while there isn’t much difference between an excellent and perfect credit score, the gap between good and excellent is greater. A “good” score of 700 to 759 can still make approval decisions easier, but you won’t get the lowest interest rates.
In the end, lenders aren’t looking for perfection; they’re looking for a score that shows you can manage debt responsibly. Plus, even if you do earn a perfect score, it’s a fleeting thing—credit scores are adjusted on a monthly basis, so you’re not guaranteed to stay at the tippy top for long.