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The Perfect Credit Score (and Why You Shouldn’t Obsess Over It)
Working hard to earn and maintain excellent credit scores is certainly worth your time. Your credit scores impact your bottom line in many different ways, from the mortgage rates you receive to your car insurance premiums to the deposit requirements you’ll pay. Building great credit is nothing short of a wealth building strategy.
The good news is that consumers seem to be taking their credit more seriously. The average credit score is at a record high, and according to FICO, the percentage of super-prime consumers (those with credit scores of 800 and higher) has been on the rise since 2010. And, the average VantageScore credit score has now risen to 675.
We’re headed in the right direction, credit score-wise. What you shouldn’t do, however, is get distracted by chasing a “perfect” credit score. It’s simply not worth your time.
What Is the Perfect Credit Score?
The most widely used credit score brands in the United States are FICO and VantageScore. FICO is the older of the two scoring systems and has been in commercial use since 1989. FICO is the credit scoring brand most commonly used by lenders — especially in the mortgage industry, where use of the FICO score has been mandated by Fannie Mae and Freddie Mac.
VantageScore, however, has been steadily gaining ground in the credit score marketplace. This newer credit score brand was launched in 2006 and was developed as a joint venture among the credit reporting agencies themselves – Equifax, TransUnion, and Experian.
The credit score range for both FICO and VantageScore credit scores is 300-850. Therefore, if you’re obsessed with earning the perfect credit score, 850 is the mark for which you’re aiming.
Achieving Credit Perfection
The formula for achieving the perfect score of 850 isn’t difficult to understand.
- First, you need to have a flawless payment history, which means no derogatory information on your credit reports.
- Next, you need to maintain low or no balances on your credit card accounts.
- You also need to have a well-aged credit report — with over 20 years of credit history, in fact.
- And finally, you need to have a mixture of different types of accounts and few or no credit inquiries.
But again, you’re wasting your time trying to pursue the perfect credit score. Here’s why.
An 850 Credit Score Is No Better Than a 760 Credit Score
When it comes to great credit scores, it’s important to remember why you wanted to achieve them in the first place. Great credit scores can save you money and can open a lot of doors for you that might have been closed otherwise. Yet, a perfect credit score isn’t necessary in order to tap into these credit perks.
- Related: Five Perks of Having Great Credit
In today’s credit and lending environments, there is little to no incremental value for having a credit score above 760. The published rates for every type of credit are as low as they’re going to go once you have a credit score of at least 760. This includes credit cards, mortgages, and auto loans.
Practically speaking, with a 760 credit score, you’ll already have access to a lender’s best rates and terms. So, a credit score of 780, 820, or even 850 isn’t going to get you anything other than bragging rights and a lot retweets or likes on your social media pages.
What Really Matters
But by all means, if hitting that perfect 850 credit score is something you’ve always wanted to do, then go for it. Just keep in mind that increasing a score that is already good is not easy.
And conversely, lowering a score that’s already good is very, VERY easy, especially if you’re trying unproven score improvement strategies.
So, be happy with your 790 or your 810 credit score, and work to maintain those elite scores rather than improve upon them.
More by John Ulzheimer:
- Four Ways You Could Be Hurting Your Credit Without Realizing It
- Listen to What Your Credit Score Is Trying to Tell You
- Do Student Loans Help or Hurt Your Credit Scores?
John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. The author of four books on the subject, Ulzheimer has been featured thousands of times over the past decade in media outlets including the Wall Street Journal, NBC Nightly News, The Los Angeles Times, CNBC, and countless others. With professional experience at both Equifax and FICO, Ulzheimer is the only credit expert who actually comes from the credit industry. He has been an expert witness in over 230 credit related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit.