The 'perfect' credit score isn't 850

Do you really need an 850 credit score to get the best rates?

Both of the most common credit scoring brands, FICO and VantageScore, use the same range to determine credit health: 300 to 850, with 850 being the highest score possible.

That has led many people to obsess over the idea of achieving the ultimate “perfect” 850 credit score. In truth, you don’t need 850 to get the best treatment from lenders. There is no lender or credit product that requires you to have a credit score of 850 in order to be approved, or to earn the best terms.

In fact, your credit scores can be 90 to 130 points off the maximum and still result in your getting approved for the best deals from mainstream lenders.

The real “perfect” credit score may be as low as 720 or 760.

According to Informa Research Services, which tracks interest rates by credit scores on a daily basis, the lowest rates offered on various mortgage-related loans are being offered to people with scores at or higher than 760. The lowest rates offered on various auto loans are being offered to people with scores at or higher than 720.

Earning the ever-elusive 850 credit score requires that you have a statistically perfect credit report that indicates you are completely void of any sort of credit risk. But again, this is unnecessary, and you will do just fine with 760 or better, which is a much easier target to hit.

How to Get to 760

A score of 760 doesn’t require perfection. You can even have derogatory entries (like a missed payment) and still get there. It just requires that these negative marks are older and limited.

You can even have a balance on your credit card and still score at or above 760. Your best bet is to use 10% or less of your card’s credit limits. That means no more than a $1,000 balance for every $10,000 in credit limits across all of your cards.

If all of this seems too complex, then let’s make it really simple. If you pay all your bills on time all the time, apply for credit only when you actually need it, and use credit cards sparingly, then you’re going to earn and maintain great credit scores. It would be impossible for you not to do so.

MagnifyMoney is a price comparison and financial education website, founded by former bankers who use their knowledge of how the system works to help you save money.


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