When you think of “perfection,” what comes to mind? Does perfection mean setting a new World Record on your way to a Gold Medal at the Olympics? How about achieving a perfect score on the SATs? Or “perfect” to you might just mean a quiet day at home without the kids and nothing on your To Do list!
But no matter your definition of perfection, there is one objective standard that is perfectly difficult to achieve: getting a perfect credit score.
While it’s extremely uncommon, it is possible to earn a perfect credit score. In fact, FICO (The Fair Issas Corporation), the leading credit scoring company, ranges from 350 to 850. Yet by FICO estimates, only about .5% (half of one percent) of all consumers with a credit score have a perfect 850 FICO.
In contrast, the average FICO score in the United States this year is 695, and only about 10% of consumers have a credit score at or above 800. Of course FICO isn’t the only credit scoring model in play, since there are literally dozens of credit scores for each consumer, and then different formats depending on whether a bank, mortgage lender, auto dealership, credit card company, etc. is inquiring.
Whether we’re talking about FICO, Vantage, or any other credit scoring company, reaching the pinnacle of a perfect score is still so rare that people sometimes end up on the local nightly news when they hit that high mark.
But is there a real advantage to a perfect 850 credit score?
Probably not. Of course there are huge financial benefits to keeping a good or even near-perfect credit score, but putting a lot of time, energy, and possibly money into trying to get that perfect score won’t pay dividends. That’s because FICO and the other credit scorers use algorithms that consider scores within “brackets,” which means if you have above 750 or maybe 780, there really won’t be an additional benefit the higher you go.
“It’s important to understand,” said FICO spokesman Anthony Sprauve to Forbes, “that if you have a FICO score above 760, you’re going to be getting the best rates and opportunities.”
So it’s likely the available interest rates on a mortgage loan, for example, will be the same great low rates whether you have a 780, 810, or even a perfect 850 score. Additionally, if and when a consumer does hit that magic 850 mark, it doesn’t mean they will hold onto it long term, as the algorithms constantly update and shift.
Likewise, there are a lot of factors out of a consumer’s control that might affect their quest for a perfect score, like credit pulls by companies and lenders who check your score, errors like duplicate reporting, or even identity theft. In fact, a 2013 Federal Trade Commission study revealed that 25% of all credit reports could contain errors that impact scores.
But on a practical level, it sure doesn’t hurt to shoot for a perfect 850 score, and then be happy with a score in the high 700s or 800s. To do that, consumers are advised to always pay their bills on time (or before the due date), keep their total debt below 10% of their total available credit, keep a good mix of revolving, installment, and mortgage debt, and check their credit report regularly, reviewing for errors or areas for improvement.
Contact Blue Water Credit if you need any help…or want to chase that perfect credit score!
