In this article:
A perfect credit score is the highest score you can achieve within a credit scoring system. Its numerical value can vary, depending on which credit scoring system is used, but it remains the holy grail for those seeking the best of the best scores.
Credit scores use statistical analysis of your credit history to forecast the likelihood you'll fail to repay a loan. The higher your score, the lower your odds of failure. A perfect score indicates you are part of an elite group with the lowest possible odds of failing to pay your bills. It tells lenders you are a highly desirable borrower and can give you access to loans with the lowest interest rates and fees as well as credit card issuers' most enticing bonus and incentive offers.
The Perfect Credit Score May Vary
Ask most people what constitutes a perfect credit score, and you'll likely hear 850. That's correct with respect to the generic FICO® Score used in most lending decisions, but it's not always the right answer to the question.
The generic FICO Score has a score range of 300 to 850, so a perfect score on that scale is, of course, 850. The same is true of the most recent scoring models from FICO competitor VantageScore®: Its VantageScore 3.0 and 4.0 models also use a 300 to 850 scale. So while FICO and VantageScore use different mathematical formulas to measure your creditworthiness (and their scores are not generally interchangeable), 850 is a perfect score on both companies' generic scores.
But many, many scoring models exist, with different score ranges and measures of perfection that differ with their numerical scales. For instance, the first two versions of the VantageScore model, VantageScore 1.0 and 2.0, use a scale of 501 to 990, so 990 is their perfect ideal.
FICO also offers specialized industry scores, the FICO Auto Score (fine-tuned to predict failure or success at repaying a car loan) and the FICO Bankcard Score (tailored to predict chances of failing to pay credit card bills). Each score is calculated differently, but both share a score range of 250 to 900, so perfection for each is a score of 900.
How Credit Scores Are Calculated
Generic credit scores, such as the VantageScore, the FICO Score, and the FICO Auto and Bankcard scores derived from the generic FICO Score, are based on credit history data compiled in your credit reports at the three national credit bureaus (Experian, Equifax, and TransUnion).
Credit score providers use sophisticated software called credit scoring models to analyze your credit report contents. Each model works differently, but all of them compare the credit decisions summarized in your credit report against behaviors that have been linked historically to the inability to pay loans. Based on the appearance (or absence) of those credit scoring factors in your history, their frequency and how recently they occurred, the scoring model assigns you a three-digit score that summarizes your risk of failure to repay.
What to Focus on When It Comes to Your Credit Score
If a lender provides you with a credit score when you've applied for a loan, or if you obtain a free FICO Score from Experian, the score will come with a report, based on your unique credit history, that indicates the top credit scoring factors benefiting your credit score and the top factors preventing it from being higher than it is. You can use this personalized information to help focus your efforts as you work toward a better credit score.
The report will detail which factors matter most to you, but the following factors, listed in order of influence, play a large part in determining everyone's credit scores:
- Payment history. Paying your bills on time is the single biggest factor that promotes a good credit score. Late or missed payments can harm your score, and delinquent accounts—those 90 days or more past due—can hurt it even more. According to FICO, payment history accounts for as much as 35% of your FICO Score.
- Credit usage rate. You probably know your credit score will suffer if you max out your credit cards by letting your outstanding balances climb close to your borrowing limits. That's the impact of credit usage, or what lenders and credit scoring pros refer to as credit utilization ratio. You can calculate yours by adding up the balances on your revolving credit accounts (such as credit cards) and dividing the result by your total credit limit. If you owe $4,000 on your credit cards and have a total credit limit of $10,000, for instance, your credit utilization rate would be 40%. A maxed-out card has a usage rate of 100%. Experts recommend keeping your utilization ratio below 30% to avoid lowering your credit scores. Credit usage is responsible for about 30% of your FICO Score.
- Length of credit history. Lenders like borrowers with solid track records of managing credit, so credit scores generally improve as your credit history ages. If you're a new credit user, there's really nothing you can do to speed up that process, but making timely payments and good credit decisions will position you to get the maximum benefit as you gain experience. Length of credit history can constitute up to 15% of your FICO Score.
- Total debt and credit. The FICO Score tends to favor a variety of credit, including both installment loans (those with fixed monthly payments, such as mortgages and student loans) and revolving credit (accounts such as credit cards that let you borrow within a specific credit limit and repay in variable amounts over time). Credit mix contributes about 10% of your FICO Score.
- Recent applications. When you apply for credit, you trigger activity known as a hard inquiry, in which the lender seeks your credit score (and, often, your credit report). Hard inquiries typically cause your credit scores to decrease temporarily. If you keep making timely payments, your scores typically recover quickly. (When you check your own credit, the result is a soft inquiry, which does not affect your credit score.) Recent credit applications can account for up to 10% of your FICO Score.
- Public Information. If bankruptcies, foreclosures, vehicle repossessions, and other public records appear on your credit report, they can have severe negative effects on your credit score. Their impact will fade with time, but they can remain on your credit reports for years (a Chapter 13 bankruptcy remains for a full decade) and may make it difficult for you to get new credit during that interval.
Benefits of Perfect Credit
A perfect credit score is an admirable (if lofty) goal and one that's achievable with lots of dedication and patience. But as a practical matter, lenders consider any exceptional FICO Score—that's a score of 800 or greater on the 300 to 850 scale—a mark of excellent credit. Achieving a score in that range is likely to give you the same advantages as a perfect score, including:
- Access to a wide range of loan products. If you have an exceptional FICO Score, you'll likely find lenders competing for your business, with attractive loan and credit card offers. You'll also probably have multiple low-interest options when applying for a car loan or mortgage.
- Higher borrowing limits. With an exceptional credit score, you can expect new credit card offers to include generous spending limits, and you should feel comfortable asking the lenders you have accounts with to increase your limits as necessary. Higher limits make larger purchases possible, and also mean you can carry larger short-term balances without exceeding the 30% usage rate experts warn can hurt your credit score.
- Excellent rate shopping. It's always smart to apply to multiple lenders when seeking credit to be sure you get the lowest interest rates and fees you qualify for, but it's especially advantageous when you have an exceptional credit score because lenders will likely extend you the best deals they offer. One percentage point less on a mortgage loan can save you tens of thousands of dollars over the life of the loan, so that can mean major savings.
- The most rewarding credit cards. In addition to credit cards with rates and fees, an exceptional FICO Score can help you qualify for cards with cash back offers, travel points and other types of incentives and bonuses. Card issuers reserve their most appealing offers for borrowers with top-notch credit, and these cards can help you save big on air travel, lodging, car rentals and purchases at your favorite retailers, and more.
- Insurance discounts. Some auto insurance companies factor in credit scores when determining monthly premiums. You can't be denied coverage based on a low credit score, but an exceptional score could help you save on premiums.
- More housing options. Landlords often use credit scores to screen tenants and gauge their financial trustworthiness. An exceptional credit score could increase your chances of getting into a house or apartment and spare you from having to pay a higher security deposit.
- Security deposit savings. If you are a new customer, a utility company may look at your credit report to get a sense of how likely you are to pay your bills on time. An exceptional credit score reduces your odds of needing to pay a security deposit when you sign up for service.
How to Get an Excellent Credit Score
You likely have dozens, if not hundreds, of credit scores, all with somewhat different criteria for excellence. Achieving perfection on all of them is likely impossible. But fortunately, decisions that lead to score improvements under any scoring system will tend to boost scores under all of them.
There are no magic formulas that will give you an exceptional credit score overnight, but by focusing on the factors that contribute to your credit score—with particular attention to any specific factors called out in your credit score report—can help you make steady progress toward credit scoring excellence, and even perfection.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.