Credit Repair

What Is the Highest (Perfect) Credit Score?

When it comes to your credit score, the higher it is, the better. Although there are many different kinds of credit scores, most scoring models agree on this point — the highest credit score possible is 850.

Both FICO and VantageScore, which own the two most widely used credit scoring models, mark 850 as the highest score out of a base range of 300 to 850.

FICO, the standard evaluation measure used by 90% of top U.S. financial institutions since its introduction over 25 years ago, also provides industry-specific scores tailored specifically for auto lenders (FICO Auto Score) and credit card companies (FICO Bankcard Score). The industry-specific FICO scores have a slightly different score range of 250 to 900, with each emphasizing more on your financial behaviors with a certain financial product.

FICO has a unique version of scores for each of the three national credit reporting bureaus — Equifax, Experian and TransUnion. Lenders use a total of 28 different FICO scores across all three agencies.

Each credit reporting bureau also offers their own credit scoring model, which is much less used and only relevant to one particular agency. All, except for Experian, has the highest score of 850.

TransRisk, known as the TransRisk New Account Score, is developed based on data from TransUnion to determine individual’s risk on new accounts. It has a 300-to-850 score range.

The Equifax Credit Score is a proprietary model created by Equifax. The Equifax Credit Score uses a numerical range of 280 to 850.

Experian offers National Equivalency Score, which assigns users a score of 360-840.

Credit Score Ranges
FICO Base FICO Auto /Bankcard VantageScore TransRisk Equifax Experian
300-850 250 to 900 300-850 300-850 280-850 360-840

 

The credit score we are discussing below is FICO, the most common credit score system used by lenders is provided by the Fair Isaac Corporation.

What it takes to get the maximum credit score

Now you might be thinking how you could reach the peak score. Before you embark that quest, let’s take a step back and first understand how credit scores work and what goes into your score.

Your credit score is what lenders use to evaluate your risk as a borrower. A high credit score demonstrates you are highly financially responsible as a borrower.

FICO scores range from 300 to 850. An exceptional FICO score typically runs from 800 to 850. As of 2016, 23% of all people fall into this range, according to FICO.

There are five factors goes into your credit score and each carries a certain value:

  • Your payment history: 35%
  • The amount of debt you owe: 30%
  • The length of your credit history: 15%
  • New credit inquiries: 10%
  • Types of credit you have: 10%

 

A few things are clear according to this score makeup: You can improve your credit by paying bills on time and reducing the utilization of your credit limit. Having a long credit history and a healthy mix of credit accounts also help. If your credit is really bad you can look to improve it with a credit repair company.  Be mindful of credit repair scams, click here for tips to recognize credit repair scams.

In a 2016 study, FICO analyzed data from millions of consumers to find out what high credit achievers — those who have a FICO score greater than 800 — have in common. Here’s what they found:

  • They almost always pay all of their bills on time. About 95% of the high achievers have never missed a payment.
  • They keep balances low on credit cards. They use about 4% of their credit limit.
  • They have a long credit history. They have an average age of accounts of more than 11 years old, and the average age of their oldest credit account is 25.4 years old.
  • They don’t open new credit often. They opened most recent account an average of 15 months ago.

Is a perfect credit score worth the effort?

Not necessarily.

Having a bad credit score can cost people financially because they pose themselves as risky borrowers. For instance, they may face higher interest rates when they borrow to buy a house.

But a credit score of 850 doesn’t necessarily come with financial benefits, although you can brag about it to friends and family. In fact, no lender requires a score of 850 to qualify you for a product or offer you the best terms and lowest rates.

A more optimal credit score to work toward is 760 — at this point, basically anyone with a score of 760 and above will get the best rate offered by lenders. According to Informa Research Services, which tracks interest rates by credit scores on a daily basis, people with scores at or higher than 760 are offered the lowest mortgage rates. This is already 60 points higher than the national average of 700.

It’s also a much more realistic goal to achieve. You can carry a balance on your credit accounts and potentially even have negative marks on your credit report, and still get a score greater than 760.

How to reach a perfect credit score

Make on-time payments.

The number one rule is making on-time payments as payment history is the largest component of your score. If you are concerned that you may miss payments, set up payment reminders or autopay to pay your monthly bills.

Keep your credit utilization at or below 30%.

It’s also key to keep your credit utilization ratio low. Your credit utilization ratio is the percentage of your available credit currently being used. Using a high percentage of your available credit could indicate that you are overextended and may be more likely to miss payments.

A good utilization ratio is generally considered at or below 30%. Keeping your balance at or below 10% may help you get your score up to 760 even faster. That means a credit balance of lower than $1,000 balance for a $10,000 credit limit. In the case of higher achievers, they would have a balance of $400 for the same credit limit amount. Keep in mind your credit utilization ratio is calculated based on the overall credit you have across all your credit cards.

Keep old credit accounts open.

Having a longer credit history generally poses less risk to lenders. However, it’s a factor out of your control — you cannot travel back with a time machine to apply for accounts. One thing you can do though is to not close your old credit accounts even if you don’t use them. Credit scoring models consider the age of your oldest and newest accounts, as well the average age of all of your accounts. Closing your old credit accounts will likely lower your average account age. If anything, you can charge one small item to your accounts each month and set the bill to be paid in full via autopay.

Avoid opening new accounts frequently.

While it’s important to have a number of accounts, it’s not wise to apply for a bunch of new credit cards in a relatively brief time period, which can ding your score. More new accounts generally pose more risk to lenders, and they will also reduce the average history of your credit accounts.

Have a diverse credit mix.

The type of credit accounts you use makes up 10% of your FICO score. The more diverse your credit mix, the higher your score is likely to be. Besides credit cards, many consumers have mortgages, car loans and other types of installment loans. But if you have a fairly healthy score and don’t need these other loans, it’s not necessary to apply for them just for the sake of having a stellar credit score. After all, the impact of credit mix is relatively modest.

Bottom line

While it will feel ultra gratifying if you score 850 on your credit, instead of focusing on achieving the highest credit score possible, try focusing on being very responsible with your credit. You don’t have to earn 850 to be considered successful credit-wise, but establishing good credit habits will go a long way.

 

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