Why You Don't Need a Perfect Credit Score

·8 min read

The last time I checked my FICO score, it was 830. I write about credit cards and credit scores for a living, so that made me crack a smile. A perfect credit score is supposedly 850, so I'm just short of that.

And guess what? I don't care about reaching the revered 850 credit score. I'm perfectly happy to sit here -- in a Zen state of mind, no less -- with my 830 score.

If you're tired of running after the highest credit score possible, you're going to like what you're about to discover. We're going to cover these topics:

-- What is a perfect credit score?

-- How often does your credit score change?

-- Why a 760 credit score is all you need.

-- How to boost your FICO score to 760.

-- How to get a free credit score.

What Is a Perfect Credit Score?

The definition of a perfect credit score depends on the credit score version that's used. For many FICO score versions, the range is 300 to 850. Here are the credit score ranges for FICO scores:

-- Exceptional: 800-850.

-- Very good: 740-799.

-- Good: 670-739.

-- Fair: 580-669.

-- Poor: 579 and below.

A lot of things have to come together to achieve a perfect 850 FICO score. You need a long and stellar credit history. You need to score high on every factor of the FICO score: payment history (35%), amounts owed (30%), credit mix (10%), new credit (10%) and length of credit history (15%).
And while 90% of lenders are using FICO score models, 10% of lenders are using something else. VantageScore is a popular non-FICO score option. The VantageScore 3.0 and 4.0 models also range from 300 to 850, but the factors are weighed differently.

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Most credit card issuers use either FICO Score 8 or FICO Bankcard Score. The highest you can get with the FICO Score 8 version is 850, but the highest FICO Bankcard Score is 900. So, you might have an 850 FICO Bankcard Score, but that's not a perfect score.

And consider this: A person who benefits from the VantageScore algorithm might have a lower score with FICO because the factors involved are weighed differently. So, if you have an 850 VantageScore, does that count as a perfect credit score?

It probably should, but my point is that there isn't an official agreed-upon perfection standard when it comes to credit scores. There are too many versions, even within the FICO brand.

How Often Does Your Credit Score Change?

When the major credit bureaus get new credit information about you from your lenders, it doesn't immediately get added to your report. There's a verification process that credit bureaus go through before the data is posted to your credit report. After your credit report is updated, the new information is considered when a credit score is requested by a lender.

But keep in mind that while many lenders report your payment history to all three bureaus, some only report to one or two. This is why, even if the same credit score version is used, you can have different scores from each bureau. You could have a perfect credit score from Equifax but a lower score from TransUnion.

Basically, chasing a perfect credit score is like trying to catch the wind. Do yourself and your sanity a favor. Focus on the credit score that will get you the top interest rates and access to the best financial products.

Even when I hear people say they have an 850 credit score, I want to ask what version of the score was used and how many bureaus were involved.

I can tell you from personal experience that these questions are not appreciated. So just give them hearty congrats and move on.

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Why a 760 Credit Score Is All You Need

No, you won't have to turn in your high-achiever credentials because you decided to get by with a number that isn't a perfect credit score. But if it's access to the best interest rates you want, instead of an 850 credit score, shoot for a 760 FICO score.

Having a score of at least 760 gets you the best credit cards and the lowest interest rates. When a credit card company determines your annual percentage rate, there isn't a dean's list category for a score in the stratosphere.

You can keep shooting for 850 if the journey really does make you happy, but if it stresses you out, then stop the craziness. Enjoy life as a person with a 760 score, which is high enough for you to be treated as if you have a perfect credit score.

How to Boost Your FICO Score to 760

Are you more relaxed now? I promise you that letting go of the 850 credit score goal will bring sanity back to your credit life. If you're not at 760 yet, you can take steps to get there.

Consumers who have achieved a credit score of 760 or higher have a lot of things in common. They all have excellent credit habits. Model yourself after high-score achievers, and you'll eventually have a high score, too.

Here are six credit habits to help you embrace your new goal of a 760 FICO score:

-- Pay all of your bills on time.

-- Keep low balances on credit cards.

-- Pay your credit card bill twice a month.

-- Apply for new credit sparingly.

-- Don't close old credit card accounts.

-- Check your free annual credit reports.

Pay all of your bills on time. Your payment history represents 35% of your FICO score. It's essential that you pay all of your bills on time, not just credit card bills. Do this and you're on your way to a higher score.

Keep low balances on credit cards. Your credit utilization represents 30% of your FICO score. Your credit utilization ratio is the amount of credit you've used compared with the amount of credit you have available. Keep it under 30% for a very good score. But to get a great score, keep it under 10%. People who have scores hovering around 800 typically use less than 10% of their credit limits.

Pay your credit card bill twice a month. This is a sneaky way to make sure a low balance or a zero balance is reported to the credit bureaus. Find out when your credit card issuer reports payment history to the bureaus each month. Then you can make sure to time your two payments accordingly.

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Apply for new credit sparingly. Every time you apply for credit, you could possibly lose a few points off your credit score. So spread out your applications and don't get credit unless you have a good reason. Also, credit card issuers don't like to see cardholders applying for a lot of credit in a short amount of time. It makes issuers think you might be desperate for credit. And trust me, nothing good will come from that!

Don't close old credit card accounts. Unless you have a good reason, such as a high annual fee, it's best to keep credit card accounts open. Closing an account can increase your credit utilization ratio because you lose the available credit. And when your ratio goes up, your credit score likely goes down.

Check your free annual credit reports. You can get free annual credit reports from each credit bureau every 12 months. Due to the recent pandemic, the bureaus are offering free weekly reports through April 20, 2022. You want to look for errors and signs of identity theft, such as a new account you didn't open. There are three major credit bureaus. I check one of my reports every four months so I get a glimpse of what's happening throughout the year.

Practicing these habits will help you get -- and keep -- a pretty high credit score. And they work for just about every credit score version. Do the right thing in your credit life and you might not have a perfect credit score, but you'll be more than fine.

How to Get a Free Credit Score

There are many ways to get a free credit score these days. You probably have a credit card issuer who offers a free score along with your monthly statement. Not all of these are FICO scores, but you'll still get an idea of where your credit stands. And there are websites that offer free educational scores that highlight which factors, such as payment history, that you need to work on.

Also, take a look at the many free credit score apps that are available, such as Mint and Discover Credit Scorecard. You can use these apps to help you track your score. Check out a few, and choose one that seems comfortable to you. It's really satisfying to watch your score improve over time.