When it comes to your credit score, higher is usually better. When you’re just starting out, you probably won’t have any credit score at all. After a few months, you might have one that’s technically classified as “low” or “poor.” But, if you consistently pay your bills on time and in full, you should find yourself with a good or even excellent credit score in no time.
But what exact is a good or excellent credit score? While there isn’t an exact scale, anything above 650 is usually considered good, while anything above 720 usually falls into the category of “great” or “excellent.” A good credit score will grant you access to lower rates on loans as well as a lot of solid credit cards. With an great or excellent credit score, there isn’t much you won’t be approved for on the basis of your score alone (though your income and other financial factors can dictate your ability to get certain loans).
But if a 720 credit score is excellent, what happens when you get to 850? Let’s take a closer look at what it means to have a perfect credit score, how to get there, and whether it’s something you should strive for.
The perfect credit score
Since credit scores range from 300 up to 850, 850 is considered a perfect credit score. To build up to a perfect credit score, there are several criteria that are important.
First off, you can’t have any derogatory marks or missed payments on your credit profile. You also need to keep your credit utilization extremely low, have multiple accounts that have been open for several years, maintain a good mix of credit types such as loans and credit cards, and refrain from opening lots of new accounts at the same time.
If you manage to check all these boxes, then you might one day find yourself with a perfect credit score. But it’s not guaranteed. Even if your credit profile is sparkling clean, you might not ever hit that magic 850 number.
Does it matter?
The good news is that having a perfect credit score isn’t something you should lose sleep over. In fact, only about 2% of people have a perfect credit score - meaning there are plenty of financially responsible and savvy credit users out there with scores way less than 850.
The obsession with a perfect credit score is rooted in big egos and doesn’t have much to do with helping you on your personal finance journey. It’s true that a higher credit score can grant you access to lower interest rates on loans, better credit cards, and a wider range of opportunities, but having an 850 credit score instead of a 750 credit score probably isn’t going to make much of a difference.
Again, it’s true that a higher credit score is never a bad thing. But relentlessly pursuing a score of 850 isn’t the best idea. Once your score is in the high 700s, getting a little higher isn’t likely to give you better options when it comes to loans, cards, or job opportunities. And pursuing a perfect score might even cause you to forgo new accounts that could be helpful. So don’t bend over backwards just to get to 850.
What should you strive for?
It’s true that you don’t need an 850 credit score to live a financially free life. But that doesn’t mean you shouldn’t focus on building and growing your credit profile. A credit score in the high 700s is a very reasonable and attainable goal, and it’s one that will help you a lot in the short and long term.