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Having a perfect score isn’t necessary, though, for getting the best rates.
A perfect credit score is 850
Only 1% of people have a perfect FICO Score, with an average score around 700
A perfect score isn’t necessary; you can still get the best loan rates with a lower score
You can improve your score by paying bills on time, keeping revolving credit balances low, and only opening new accounts when necessary
A credit score is a three digit number that lenders use to determine someone’s creditworthiness. The higher your score is, the more likely you are to pay back a loan or line of credit in full and on time.
Lenders, banks, and other financial institutions check your credit score — along with the rest of your credit history — before offering you any type of loan or credit. Individuals with higher scores will qualify for lower interest rates and better APRs. (Read more on how APRs vary with different types of loans.) So it’s important to maintain the highest credit score possible in order to get the best rates possible.
When people talk about their credit score, they’re talking about a general credit score that considers their entire credit picture. There are also industry-specific credit scores that aren’t as important, but that we will get into later.
General credit scores range from 300 to 850, with 850 being a perfect score. Honestly, it isn’t worth chasing a perfect score, though. Many lenders offer great rates for scores above 700. Lenders may not even differentiate between close scores, meaning 830 can be just as good as 850 in most cases.
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There are two main credit scoring models: the FICO Score and the VantageScore. Both of these give consumers a score to help lenders decide which potential customers will be reliable borrowers. Both scores range from 300 to 850 and higher scores are better.
These credit scores use the information in your credit report to create their scores. And since each of us has three credit report files — one from Equifax, Experian, and TransUnion — each of us will have three versions of both the FICO Score and VantageScore. When you see your credit score, you should also check to see which credit bureau’s report that score is based on.
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Each of the major credit bureaus, also called credit reporting agencies, may have slightly different information on you at any given time, and so it’s possible for everyone to have three different FICO Scores and VantageScores.
In addition to your general credit score, FICO also has two industry-specific scores: the FICO Auto Score, for autolenders, and the FICO Bankcard Score, for credit card lending. These scores are tailored to help lenders see how reliable you will be as a customer for that specific product. Mortgage lenders just use the general FICO Score.
These industry-specific FICO Scores have a range of 250-900, with 900 being a perfect score. If you’re looking specifically to get an auto loan or new credit card, it may be worth checking one of these two scores, though it isn’t necessary.
These specific scores are similar to your regular FICO Score and so knowing the range of your general score is enough. The standard FICO Score is also the most popular and many lenders will simply use that.
Read more on what’s a good credit score for buying a car.
No, having perfect credit doesn’t really matter. Whether your credit score is 830 or 850 won’t have much impact on the rates you get from lenders. A lender would simply see that you have an excellent credit score. So it isn’t worth chasing after a perfect credit score. Your goal instead should be to keep your score as high as possible.
Very few people even have a perfect score. According to a 2018 report from Experian, only 1.2% of people with a FICO Score had a perfect 850. The average score was 701.
Lenders generally rate credit scores based on five score ranges. FICO defines these ranges as excellent (800-850), very good (740-799), good (670-739), fair (580-669), and poor (300-579).
Having a higher score is better, but sometimes moving into a higher range can make more of an impact on the rates you receive. Many lenders also use these ranges as cutoff points, especially at the lower end. For example, certain credit cards require you to have excellent credit, and some mortgage lenders won’t give you a mortgage if your score is less than 580.
|FICO score range||Score rating|
These ranges offer a good guide, but the exact limits of each range are fluid and your best bet is to simply have the highest score possible. Here’s more on what credit score you should aim for based on the type of loan you’re applying for.
Regardless of which score you’re using, there are a few main things should always do if you want to maximize your credit score:
To help understand the ways you can improve your score, here are the things that go into a FICO Score and how important each factor is (the exact importance of VantageScore’s factors are less clear).
|Factor||Percentage of FICO Score|
|Length of credit history||15%|
|New credit inquiries||10%|
Late payments will bring down your credit score, especially if you regularly pay late. The FICO Score calculations consider the last seven years of your payment history, so you will need to have seven years of making every payment on time to have any chance at a perfect score.
Using too much of your available credit will also affect your score, which is why it’s best to keep your credit card balances low. Your credit utilization ratio is how much of your total available credit you have used at any given time. If your total credit limit is $10,000 and you have a balance of $1,000, then your credit utilization ratio is 10% ($1,000 divided by $10,000).
Ideally, you want to keep your utilization ratio below 30%. Lower utilization — 10% or less — may be necessary for a perfect score.
Having a longer credit history also helps because it shows that you have a history of paying your bills and of working with lenders. So having 25 years of credit history will help more than having 15 years, potentially make it hard for you younger individuals to even get a perfect score.
Having multiple types of credit accounts (your credit mix) isn’t a huge factor in your score, but it does make a difference. That means you can benefit from having some mix of revolving credit (credit cards) and other installment loans, like student loans or a mortgage.
(Learn more about how much of a mortgage you can afford with this mortgage calculator.)
Finally, if you want the highest possible score, be careful about regularly applying for new credit. Frequently applying for credit card accounts or even just asking for frequent credit line increases may signal that you are going to be taking on more debt.
We have also written a more in-depth guide on how to raise your credit score.
Many banks, lenders, and credit card providers offer customers access to their FICO Score or VantageScore for free. Log in to your account and check to see if this benefit is available.
If this isn’t an option for you, it is possible to get your score either directly from FICO or one of the three credit bureaus, for a fee. FICO offers a free tool where you answer 10 questions and it tells you what range your score likely falls into.
There are also many services online that allow you to check your score just by creating a free account.
Any time you check your credit score somewhere, there are a couple things to keep in mind. One is which credit bureau’s report this score uses. So if your bank offers a free score using your Equifax report but your credit card provider offers a free score using your TransUnion report, the two scores may be different even if they were pulled on the same date. They should be similar, but they may not be the same.
Make sure to always check whether a service is showing you a FICO Score, a VantageScore, or some other credit score. FICO is the industry standard. If you’re planning to apply for a loan in the near future, make sure to look specifically for your FICO Score. Your VantageScore may be similar enough if that’s all you have free access to, but keep in mind that it may very well be different from your FICO Score.
As mentioned, the information that companies use to create your credit score comes from your credit report. That means it’s important to make sure your credit reports are accurate. If there is an error, outdated information, or if there is any fraud, you should contact the credit bureau immediately to dispute the mistake and get it corrected.
One good resource is this guide that explains how to get a free credit report and how to actually read your credit report.
About the author
Derek is a tax expert at Policygenius in New York City. He has written about multiple personal finance topics in the past, and his work has been covered by Yahoo Finance, MSN, Business Insider and CNBC.
Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.
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