There’s no argument that getting a FICO credit score of 850 is a personal finance milestone and increases demand for credit score monitoring services and credit score estimators. But the fact it, other than bragging rights, this perfect credit score is unnecessary for your daily finances and scoring it almost impossible.
Creditors hardly distinguish between a credit score of 780 and 850, and attempts to attain it is fading. Unlike a test that is scored once, credit scores are calculated anew every time after a request is being made and the changes are reported on your credit report, which is constantly updated. John Ulzheimer, a credit expert with CreditSesame.com said that even if someone got a credit score of 850, there’s no guarantee that it would stay there as it could get changed anytime.
So is it possible?
Even Ulzheimer, who worked for both Equifax and FICO, never himself got a perfect FICO score, though he got a VantageScore of 990, which is the highest possible score once can get for that version. (Recently VantageScore changed its credit score range to 300-850, similar to FICO’s). After an informal survey conducted on a dozen mortgage professionals, there’s been no reports of a perfect credit score either, raising the question that if is it ever possible.
Well, it is, according to Frederic Hyunh, FICO’s senior principal scientist. The company didn’t give any anecdotes or examples, but it did release a report on the characteristics of high credit score achievers last year, who are defined having credit scores over 785. Other findings include:
• 2/3 has less than $8,500 in total debts, excluding mortgages.
• 96 percent have no missed payments on their credit reports.
• High score achievers only use an average of 7percent of their allocated credit on credit cards.
The given statistics alone include factors that contribute 65 percent of one’s credit score. The payment history accounts for 35 percent, and total amounts owed contribute 30 percent. The former is pretty simple; just pay the minimum account, at least, on time and every time. The latter is tricky, particularly when it involves credit utilization rates on revolving credit accounts. But it’s recommended that you use less that 20 percent of your available credit on your credit cards, but you can see the highest credit score achievers use way down less, just 7 percent. This means that charging only $70 on a credit card with a credit limit of $1,000.
Now the big question is does it matter?
According to Dick Lepre, a loan agent of RPM Mortgage in California, said that a perfect credit score of isn’t required to qualify for the lowest interest rates for mortgages. In fact, if you’ve a credit score of 740, you can secure the best mortgage rates. For auto loans and credit cards, the bar is set even lower, though the requirements vary by lenders.
Generally, lenders aren’t seeking perfect credit scores; they’re looking for credit scores which show that you manage your debts well. You will eligible for the best rates, as long as you meet their thresholds.