This summer, CNBC reported the national average for the most popular credit score, the FICO, hit an all-time high of 700. That’s just 150 points below the highest FICO score you can get, an 850.
Although this is good news for Americans’ credit health, Type A household-money managers might wonder what they have to do to get to that elusive 850. Unfortunately, the goal of achieving a “perfect” credit score of 850 isn’t that simple. And it might not even be worth your while.
But if you just can’t help but wonder, “What is a perfect credit score, and how can I get one?” here’s some information to help.
What is a perfect credit score — and why is it so hard to get?
Before going too far into the idea of a perfect credit score, there are a few facts you should know about credit scores in general:
- There are two different credit scores: FICO and VantageScore.
- FICO is the original credit score and still the most popular.
- VantageScore came along just a few years ago and is quickly gaining in popularity.
- Lenders and companies who look at your score choose which one to work with.
- There are various models of each of these scores, and lenders don’t always upgrade to the new model right away…
- … On top of which, there are also various models based on the type of credit you want…
- … All of which means you have far more than just one credit score (upwards of 40 credit scores, in fact), and they can vary from each other quite a bit.
Now that you have the basic facts straight, the next thing to know is that credit scores come in ranges. Below are the ranges for the FICO score:
And here are the ranges for the VantageScore:
As you can see, the two scores are similar in range. But even if you were able to hit “perfect” status on one of the scores, you could still be showing up as less than perfect on the other.
What’s more, you can have a perfect credit score for a new model of the score while showing up as less than perfect in the old model of the same score — and even have a different score based on the type of credit you might want to obtain.
In the end, there’s just no need to chase after a perfect credit score in all possible variations that the score might have.
Instead, the best thing to strive for is the best credit score you can achieve, with excellent being the top range you can land in. If you can reach excellent, you’ll receive the top benefits of having the highest score, such as access to more credit and lower interest rates on the credit you borrow.
What you should focus on with your credit score
Just because you don’t need to fixate on having a perfect credit score doesn’t mean you shouldn’t work on improving your credit. Rod Griffin, director of public education for Experian, explains why:
“It is very difficult to get a perfect score, and that really isn’t the goal. If you borrow money, there is always some risk that you will be unable to repay it. You could be injured at work, get hurt in a car accident, or contract a debilitating illness, and simply not be able to repay the debt — through no fault of your own.”
“Credit scoring systems recognize that risk and account for it,” Griffin says. “Instead of a perfect score, your goal should be to have a score that is good enough to get the credit you need at the best rates. Once you’ve reached that threshold you don’t need to worry about getting better.”
So, how can you improve your score? Whether you’re looking at FICO or VantageScore, the factors considered are similar:
As seen above, the most important things to worry about are payment history, how much you owe, the age of your accounts, the type of credit you’re holding, and your credit mix.
In other words, you can work toward having excellent credit scores by doing the following:
- Pay all of your bills on time. If you’re in default, get out of it.
- Reduce the amount of debt you owe, especially on credit cards.
- Keep accounts open, even after they’re paid off.
- Know that having a credit mix is good — so if you have a credit card as well as a car loan, student loan, and mortgage, then that helps your credit.
Finally, remember that one of the worst myths about credit scores is the idea that you should hold a balance on your credit card to build credit. This is completely false.
If you want to use a credit card to build credit, pay it in full every month, and you can reap the rewards of credit-building while also avoiding debt.
Keep it simple
Hopefully, it’s a relief that you don’t have to worry about getting and maintaining a perfect credit score. But if you’re still worried about how credit scores work, follow Griffin’s final words of wisdom:
“Pay your bills on time, every time. Keep your credit card balances as low as possible. Apply for credit only when you need it. Do those things, and your scores will take care of themselves.”
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