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While the highest credit score you can achieve will vary by scoring model, the two primary credit scoring models a lender will use to judge your creditworthiness, FICO and VantageScore®, top out at 850. This may be an enticing goal for some, but it may not be a realistic pursuit. In baseball, even the best pitcher may never throw a perfect game, and you need not have an 850 score to be considered a credit major leaguer.
Here's what you need to know about the perfect credit score and whether it's a goal worth striving for.
Why Your Credit Score Matters
Lenders and other financial institutions use credit scores to get a snapshot of your overall credit health. While they'll typically consider more than just your credit score in a lending decision, that three-digit number is an important factor because it gives them a quick understanding of how likely you are to repay your debts on time.
Also, some auto and homeowners insurance companies use what's called a credit-based insurance score to help determine your monthly rates, although this isn't allowed in every state.
Most credit scoring systems use a scale that ranges from 300 to 850. There are, however, some credit scoring models that go up to 900 or 950, including industry-specific scores used by certain institutions.
Working your way up to an 850 credit score might sound appealing, but it isn't necessary. Simply having a credit score in the upper 700s or low 800s indicates that you're a responsible credit user, and you'll likely qualify for the same terms that you would with a perfect credit score.
So instead of shooting for a specific score, focus on the credit score ranges. Here are the ranges for one of the most common scoring models, the FICO® Score☉ :
|FICO® Score Ranges
|Credit Score Range
What Are the Benefits of Having a High Credit Score?
There are several reasons to work toward a high credit score, and all of them involve saving money:
- Score lower rates on car loans: Unless you have enough cash to buy a car outright, you'll likely need to get an auto loan. Having a good credit score can help you secure a loan with the best possible terms. Consumers with the highest credit scores qualify for an average interest rate of 4.2% on a new car, compared with 14.97% for people with the lowest credit scores, according to Experian data.
- Get credit cards with great rewards: You can qualify for a credit card with just about any type of credit. But the best credit cards in terms of rewards and benefits typically require good to exceptional credit scores.
- Qualify for the lowest rate on a mortgage: Given the amount of money involved, your mortgage is the loan you'll want to get the lowest interest rate possible on. It's worth putting in the extra work to shop around and negotiate, as even a small percentage increase can cost you tens of thousands of dollars over the life of your loan. Getting your credit ready for a mortgage is an essential step in the homebuying process.
- Negotiate lower interest rates on your credit cards: If you completely pay off your credit card balance each month, your credit card APR is irrelevant. But if you're carrying a balance, having a great credit score could help your negotiations with your lender to lower your interest rate. Getting a lower interest rate could save you a lot of money.
- Get better insurance rates: If you're shopping around for homeowners or auto insurance rates, having a great credit score may help you qualify for a lower monthly premium—except in certain states where the practice is banned.
- Refinance your loans to save money: If you've improved your credit score since you opened one of your loan accounts, you may be able to refinance it at a lower rate and save money.
How to Get an 800 Credit Score and Above
You don't need a perfect credit score, but if you're looking to achieve an 800 credit score or higher, there are some concrete actions you can start taking now. Keep in mind, though, that it takes a long credit history and no derogatory marks on a credit report to establish and maintain a high credit score.
As you work toward improving your credit, here are some tips to help you get started:
- Check your credit report and scores: You can check your credit score with Experian, and get a copy of your credit reports from all three credit reporting agencies once a year through AnnualCreditReport.com or once every 30 days with Experian. With this information in hand, you'll have a better idea of the areas of your credit history you need to address.
- Dispute inaccuracies on your credit report: While credit report errors aren't common, it is possible a report contains something erroneous or fraudulent. If you find inaccurate information—clerical errors, doubled information or fraud, for instance—file a dispute with the credit reporting agencies.
- Pay on time: On-time payments carry the most weight in your credit scores, so make it a goal to pay bills on time every month. If you're behind on payments, or have an account in collections, take care of it as quickly as possible.
- Keep your credit card balances low: Your credit utilization rate, or amount of available credit you're using, is another big factor in your credit score. To figure out your utilization rate, divide your total credit card balances by your total credit limits. A credit utilization rate of 30% or higher can negatively affect your credit score. Generally, keeping a credit card's balance low relative to its credit limit will help improve your credit scores. For the top scores, your utilization rate should be under 6%.
- Avoid new hard inquiries: Virtually every time you apply for credit, the lender will run a credit check, which results in a hard inquiry on your credit report. Hard inquiries won't stay on your reports for long, but can have a compounding negative effect on your credit score. Not all inquiries are bad, as checking your own credit results in a soft inquiry that does not affect your credit scores.
- Let negative information fall off your credit reports: If you have negative information on your credit reports, there may not be much you can do other than wait until it naturally falls off your report. Depending on the information, this can take several years. Keep in mind that new, positive information generally carries more weight than old, negative information.
Achieving a Great Credit Score Takes Time
You won't achieve above an 800 credit score overnight, so you'll need a lot of patience as you work toward that goal. But as you develop good credit habits, you'll be rewarded as your credit scores respond positively.
As your credit scores climb, you'll see savings along the way as lenders view you as a more reliable borrower.