Being perfect has a nice ring to it, especially when it comes to personal finance. A perfect credit score of 850 feels like a sign that you have arrived. Still, financial perfection shouldn’t be the goal; following good financial habits may be more important. Here’s why.
Key takeaways
- Perfection isn’t necessary: While a perfect credit score of 850 has benefits, an “excellent” score (typically around 740+) is usually sufficient to access the best financial offers.
- Focus on good habits: Building and maintaining good financial habits is more important than chasing a perfect score.
- Benefits of a good score: A good credit score still leads to lower interest rates, better credit card offers, and improved chances of loan approval.
- How to improve your score: Key actions include paying bills on time, keeping credit utilization low, maintaining older credit accounts, and being mindful of new credit applications.
- Holistic financial health matters more: Don’t prioritize a perfect credit score over other crucial aspects of personal finance like building an emergency fund and planning for retirement.
What is a perfect credit score?
If you want to be perfect when it comes to credit, a score of 850 is necessary. Credit score ranges span from 300 to 850. Reaching 850 makes you perfect in the eyes of both FICO and VantageScore.
Aside from pride, being perfect comes with certain benefits. According to John Cabell, managing director of payments intelligence at J.D. Power, a leader in consumer insights, advisory services and data and analytics, “Consumers with perfect credit scores have access to the best retail financial offers and opportunities in the marketplace, such as competitive interest rates, credit limits, and loan approval.”
While these are fantastic benefits, it’s worth asking if having a perfect credit score is necessary. Unfortunately, credit reporting agencies keep what’s required relatively secret, making it challenging to achieve perfection with confidence.
According to Experian, as of Q3 2023, less than 2% of U.S. consumers had perfect credit, so it’s not a level most reach.
Why an excellent credit score is good enough
All is not lost if you’re among those who fail to achieve perfection. Knowing the credit score ranges is important when analyzing your situation. FICO, the most-recognized scoring brand, views having a credit score of at least 740 as “very good.” Most consumers can greatly benefit from such a score.
According to Jason Scott, senior vice president and regional manager at Sunrise Banks, “The ‘perfect’ credit score largely will not benefit you any more than any score a certain lender considers top tier. The range will vary by lender, but still reasonably could be considered 720 to 850. This is a wide range and should be considered the target rather than a specific number.”
Not having a perfect credit score may leave you stinging; shooting for the upper range is sufficient for most. You’re still in line for competitive rates with most creditors, allowing you to save money.
Scott adds, “The goal should be to keep your score held in high regards as it is truly the key to having options in what you want to do. Perfection is not as important as positioning yourself to be able to handle life events and planned events.”
Why is a credit score important?
Despite the lack of perfection, there are many perks to having what’s considered a good credit score. Qualifying for lower interest rates is the obvious advantage, but it’s just the tip of the iceberg.
There are other benefits of having a great credit score, such as:
- Better chances of qualifying for credit. Lenders want to work with people with good credit. The higher your score the more likely you will qualify for credit.
- Reduced insurance rates. Some insurers include your credit score when calculating rates. A good credit score may result in lower rates.
- Better credit card offers. Having great credit opens up more attractive credit card offers. You don’t need to be perfect to qualify for the best credit cards.
- Lower utility or phone plan bills: Utility providers and phone carriers like Verizon often check your credit before extending service. Having excellent credit can result in reduced deposits or financing terms.
Perfection is nice, but it’s not required to optimize your finances.
Powerful ways to boost your credit score
Achieving a perfect credit score is difficult. On the other hand, obtaining a good credit score is relatively simple. Credit reporting agencies don’t outlay the exact formula to how they calculate scores, but what they do make public provides a good strategy to follow.
Doing the following can strongly influence your credit score:
- Don’t miss a monthly payment. Payment history comprises 35% of your credit score. Making on-time payments is the best way to boost your credit.
- Keep your balances low. The amount you owe on credit cards comprises 30% of a score. It’s best to keep your credit utilization ratio low, aiming for no more than 10% of your available revolving credit.
- Keep your oldest card open. Age is a good thing with credit. The length of credit history comprises 15% of your score. While it’s tempting to close an old card, doing so often negatively influences credit scores.
- Be purposeful when applying for new credit. Rewards cards are fun to have, but the more applications you have, the more hard inquiries you have on your credit report. This can cause your credit score to dip.
- Dispute errors on your credit report: Mistakes can happen on your report. Regularly analyze your credit report to determine if there’s an error. You can request a free report from each of the three reporting agencies annually, so it’s wise to take advantage. If you do find an error and are successful in getting it removed, it may positively impact your credit score.
Focusing on your holistic financial health is more important
Having a perfect credit score isn’t necessary to be successful with your finances. Credit is just one part of managing your financial life. Don’t let chasing perfect credit crowd out other necessary focus areas.
Cabell concurs, adding, “It is better to manage your money so that you can meet financial obligations and live without financial anxiety.” This requires having both a short and long-term mindset with your finances.
According to Kristy Kim, CEO and founder of TomoCredit, a credit-building platform that allows users to build their credit score without a traditional credit history, “Instead of striving for a perfect credit score, focusing on building a solid emergency fund should be a top priority in personal finance.” Following this approach provides peace of mind in emergencies without incurring debt on a credit card.
Kim suggests not stopping there, advising people to similarly focus on retirement planning, noting, “Prioritizing investments over credit score perfection ensures that you’re growing your net worth and preparing for future financial needs, which will have a more significant impact on your overall financial well-being.” Good credit is important, but don’t sacrifice financial health by chasing perfect credit.
Frequently asked questions
Is it possible to have a perfect credit score?
Yes, it is possible to have a perfect credit score of 850, according to both FICO and VantageScore. However, it is relatively rare.
How to get a perfect credit score
Achieving a perfect credit score, while possible, hinges on consistently demonstrating excellent credit behavior over time. The most crucial element is an impeccable payment history, meaning you always pay all your bills on time, every time. Secondly, maintaining a very low credit utilization ratio is essential; ideally, you should use only a small fraction of your available credit. Building a long credit history also contributes positively, so it’s generally wise to keep older, well-managed accounts open. Finally, be mindful of when you apply for new credit, as frequent applications can result in hard inquiries that may slightly lower your score. Avoiding any negative marks on your credit report, such as missed payments or defaults, is also paramount in the pursuit of a perfect score.
How to get a 900 credit score
While a “perfect” credit score is generally considered to be 850 on both the FICO and VantageScore models (the most commonly used), a score of 900 is not possible with these standard scoring systems used in the United States.
Older or industry-specific models might have had different ranges, but for the scores that matter to most consumers, 850 is the upper limit. You should aim for the high 700s to low 800s to receive the best benefits.
Is a perfect credit score necessary to get the best credit cards?
No, a perfect credit score is not necessary to get the best credit cards. While a perfect score can help, an excellent credit score, typically in the high 700s to low 800s, is usually sufficient to qualify for most of the top-tier rewards and premium credit cards.
Can I still be approved with a 700 credit score?
Yes, absolutely. A credit score of 700 is generally considered good. With a 700 credit score, you have a very high chance of being approved for many credit cards, including those with rewards and decent terms. While it might not qualify you for the absolute best, most exclusive cards, you’ll still have access to a wide range of options.
Does checking my score hurt my financial health?
Checking your own credit score does not hurt your financial health. These checks are considered “soft inquiries” and do not impact your credit score. In fact, regularly checking your score can help you monitor your credit and identify any potential issues.
The bottom line
A perfect credit score is nice to have, but it isn’t required for financial success. Having a minimum score in the range of 720 to 740 typically avails you of the best rates and credit card offers. Having a credit score of 850 is secondary to your overall financial health.
