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What Is The Highest Credit Score And Is It Possible To Have Perfect Credit?

9-minute read

A perfect 10 on a gymnastics routine. A perfect score on a test. Perfect is our ideal that we reach for, no matter what the endeavor. So, for all you perfectionists, this article is for you: How to achieve a perfect credit score.

And what you might appreciate is that there is not one “perfect credit score.” With the FICO® model, the highest credit score is 850. Any score above 740 is considered “excellent” and will get you the best interest rates on mortgages, credit cards and car loans.

There isn’t one specific number you need to hit in order to have an excellent credit score. Instead, your credit score will fall within one of five different credit ranges: very poor, fair, good, very good and excellent.

These ranges do vary slightly depending on the credit bureau calculating your score. Here’s how the three major credit bureaus define an excellent credit score:

 

Credit Bureau

Excellent Score

TransUnion®

781-850

Equifax®

760-850

Experian

750-850

How Many People Have Perfect Credit Scores?

You may be wondering, what is a perfect credit score? And how many people have actually achieved this feat?

FICO® Scores range from the lowest possible credit score, 300, to the highest possible credit score, 850. According to data from FICO®, about 1.6% of the U.S. population has a credit score of 850. This figure is up from 0.98% in April 2014 and 0.85% in April 2009.

For many people, reaching an 850 credit score can seem like a daunting task. But when you look at the lifestyle and financial habits of individuals who have an 850 credit score, you’ll notice many commonalities.

And this really starts with where they live, as you’ll see in the chart below. The following five states contain the highest number of individuals with an 850 credit score:

 

State

Percentage

Hawaii

2.62%

Connecticut

2.30%

New Jersey

2.27%

Minnesota

2.24%

Maine

2.21%

 

Individuals with an 850 credit score share several other traits as well. For instance, most tend to live in large metropolitan areas.

And most report living healthier lifestyles and having achieved higher levels of education. Here are the financial practices of those that have an 850 credit score:

  • They don’t have a history of missed payments, collections or derogatory marks on their credit report

  • Excluding their mortgage, the average total credit balance is $13,000

  • The average credit utilization rate is 4.1%

  • These individuals have a very established credit history

They regularly seek out new credit opportunities; 10% had made at least one new credit inquiry in the past year. Knowing what practices have helped others can help you achieve your best potential score, too.

What’s The Range For FICO® Scores?

Your FICO® Score will be a three-digit number, ranging from 300 to 800+.

But most lenders aren’t looking for one specific number, but rather an overall feeling for how you handle credit. Therefore they group them so you can look at the scale and see where you fall. While aiming for the top is important, you are likely still able to get credit with a “very good” score, while some lenders might even dip down into the “good” designation. Here is how they group the scores on a scale:

  • Exceptional: 800+

  • Very good: 740 – 799

  • Good: 670 – 739

  • Fair: 580 – 669

  • Poor: 579 and below

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Is It Necessary To Have The Highest Credit Score?

Any credit score that’s 800 and up is exceptional, with the highest credit score possible being 850. But is having the highest score necessary?

Fortunately, no, it’s not. That’s a great goal to aim for, but it’s also pretty uncommon. It takes a lot of credit history to reach an 850 score.

Of the individuals surveyed by FICO®, the average age of their oldest account was 30 years old. That means it’s going to be harder for young adults to achieve such a high credit score, merely because they just don’t have time on their side.

And a credit score of 740 or higher is considered excellent. So reaching this score is a good goal, as it will be enough to help you qualify for the lowest rates on a loan or mortgage.

Why Is Having A High Credit Score Important?

While it’s not necessary to have an 850 score, it’s important to maintain a high credit score. This will make it easier for you to buy a home, purchase a car and even get a job.

Your credit score shows your history of repaying your debts and making your monthly payments on time. If you have an excellent or even perfect credit score, the lender assumes you’re not a risky investment because they assume that you will treat new credit as you have credit in the past and pay it back responsibly.

But, if your credit history shows that you don’t pay your bills on time, some lenders may be hesitant to extend you a line of credit. They may be more concerned that this pattern will repeat itself, and they will be out that money.

Many workplaces are increasingly looking to hire employees with high credit scores. That’s because a good credit score demonstrates a history of financial responsibility.

Other Benefits Of Improving Your Credit Score

The main benefit is in getting a loan at all, of course. But that’s not all you get by avoiding bad credit. Here are some other benefits of a higher score.

Lower interest rate: Interest is the amount of money you pay on your loan. And for a mortgage in particular, your interest rate can have a significant implication on your financial future. That’s because the amount of interest you pay over the life of a loan adds up fast. The lower the rate, the less you’ll pay overall.

Bargaining power: Want the best credit cards with longer payment cycles or more perks? The better your credit score the more apt they are to upgrade you to a more attractive product, such as one that can earn you cash back, airline miles, or other benefits. In addition, you are more likely to get favorable treatment should something go awry. For example, if you’re temporarily unemployed and need to skip a payment on your credit card balances, or you sent your payment in late by mistake, the card issuers might be more apt to forgive you if you’ve shown yourself to be a responsible customer. Major credit card issuers also might be more inclined to raise your limit if you have a big-ticket purchase coming up, or want a little more wiggle room on your monthly bills.

Better car insurance rates: Hard to believe that a good credit score would make a difference here, isn’t it? But it does. Your insurance provider is going to look at how responsibly you handle your personal finances, and make some assumptions about other areas of your life, such as driving. This is the “halo effect” at work, as your good behavior with your finances can help you look like a better risk in all other areas, including insurance.

Waived security deposits: If you’re opening new accounts with a utility or a cell phone provider, they may ask you to make a security deposit to provide them some protection in case you don’t pay your bills on time – or at all. The good news is that this halo effect of a great credit score will shine through and they may allow you to skip the security deposit, keeping those dollars in your wallet. Once again, your responsible financial habits are paying off in less money out of your pocket, not to mention less hassle.

Who Determines Your Credit Score?

FICO® and VantageScore® are the two primary credit-scoring models. FICO® was created in 1989 by Fair, Isaac and Company.

VantageScore® was created in 2006 as a joint effort by the three major credit bureaus. VantageScore® was designed to be a more consumer-friendly model of credit scoring.  

FICO®

FICO® uses predictive analytics to take consumer information and analyze it. The company uses the following five factors for its credit-scoring model:

  • Payment history

  • Total debt

  • Credit history

  • Types of credit

  • Credit inquiries

From there, FICO® gives each individual a credit score. To generate a FICO® Score, you must have a certain amount of available credit.

Overall, FICO® is considered a credible source of consumer information. That’s because FICO® scores tend to be a reliable way of determining whether someone will repay a loan on time.

VantageScore®

VantageScore® was developed as a joint venture by Experian™, Equifax® and TransUnion®. Like FICO®, it calculates consumer credit scores, but in a slightly different way.

Unlike FICO®, VantageScore® uses six different categories in its credit scoring model:

  • Payment history

  • Credit utilization

  • Total balance

  • Depth of credit

  • Recent credit

  • Available credit

VantageScore® is considered a reliable source because it’s a collaboration of the three major credit bureaus. Rocket HomesSM gives you free access to your Vantage 3.0 credit score.

What Factors Determine Your Credit Score?

As you can see, several different factors can influence your credit score. But the following three items are the main factors you should keep in mind.

Credit History

Your credit history accounts for 15% of your FICO® Score. That’s because a longer credit history provides lenders with more insight into your financial habits.

When considering your credit history, FICO® models consider the age of your oldest account and the average age of your combined accounts.

Credit Utilization

Credit utilization accounts for 30% of your FICO® Score. Your credit utilization is the credit you’re currently using divided by the total amount borrowed.

For instance, if you have $1,000 in available credit and have spent $500, then your credit utilization rate is 50%. Ideally, you should keep your credit utilization rate below 30%.

But if you want an excellent score, you should aim to have a much lower credit utilization rate. As we saw from the earlier example, individuals with an 850 score keep their credit utilization rate as low as 4%.

Accumulated Debt

It’s a good idea to have a variety of credit history. This history is what’s known as a credit mix, and it accounts for 10% of your total credit score.

Having a healthy mix of revolving liability and loan products shows that you can manage a variety of different debts. Revolving debt includes things like credit cards, and loan products include things like a mortgage or car payments, as well as student loans.

How To Get A Higher Credit Score

If your credit score is lower than you would like, there are steps you can take to build your credit. As you can see, achieving a high credit score isn’t arbitrary. There is a formula you can follow to raise your credit score.

However, depending on your age and credit history, it may be challenging for you to reach a perfect credit score of 850. It’s possible, but you’ll need to have a very low credit utilization rate and a robust credit history.

But achieving a credit score of 740 or higher is entirely possible. Listed below are three financial habits that will help you achieve this.

Practice Financial Responsibility

The best way to achieve an excellent credit score is by practicing financial responsibility in your personal spending. You can do this by creating a realistic budget every month and eliminating all nonessential expenses.

When you practice responsible spending, you’re building a strong financial foundation. This foundation will equip you to make better decisions when it comes to borrowing and repaying your debt.

Make Consistent, On-Time Payments

Many people underestimate the importance of making their loan payments on time every month. Your payment history accounts for 35% of your total credit score, so don’t make the mistake of neglecting this area.

Your creditors will report your payment activity to the credit bureaus every 30 days. While a single missed payment is unlikely to hurt your credit, multiple late payments will cause your score to take a hit.

Also note that this metric refers to loan products like credit cards, student loans or mortgage payments. Other monthly payments, like your gas or water bill, won’t hurt your credit unless the company sends you to a collection agency. However, it’s a good practice to pay those on time, anyway.

Monitor Your Credit Reports

Because your credit score is constantly being updated, it’s important to monitor your report regularly. Doing this will help ensure that all the information on your credit report is accurate. And if there are errors, you can find out about them and have them removed in a timely manner, before they do any damage.

You’re entitled to receive one free copy of your credit report from Experian, Equifax, and TransUnion every 12 months. You can order a copy of your report online at AnnualCreditReport.com.

And for ongoing monitoring of your credit, you can check your VantageScore® at Rocket HomesSM.

How To Keep A Great Credit Score

The tips above are helpful for obtaining a great credit score, but also for keeping it once you achieve that goal. Here are three other ways that you can keep your credit score solid gold:

Since credit history is an important metric, in most cases you won’t want to close a credit card, even if you don’t use it regularly. That’s because holding a credit card for a long time can have a positive effect on your credit score. So even if you don’t use it on the regular, you don’t have to close it. And if you feel like the credit card issuer wants you to use it occasionally, set it up as the place where you have a small subscription auto billed. Just don’t forget to pay it!

Which brings us to our next tip: You might want to set up automatic payment to ensure you never miss a payment. That can happen more easily than you might think if you’re out of town and don’t see a statement come through, or accidentally pull out a card you rarely use to charge a meal and then forget to pay it at the end of the month.

And finally, keep that credit utilization low. That means you don’t want to run up your cards, even if you intend to pay them off at the end of the month. Instead, you might ask the credit issuer to increase your limit or you could apply for a new credit card and pay attention to how you allocate your monthly spend to ensure that you are spreading it out evenly.

Bottom Line

All credit scores fall within a range of 300 – 850, with 850 being the highest credit score possible. Achieving a credit score of 850 is possible, though it can be challenging for most consumers.

Fortunately, it’s not necessary to have a perfect credit score. But you should consider achieving a high credit score a priority. Having a score of 740 or higher will allow you to qualify for the best rates on loan products.

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