Do You Really Need an 850 Credit Score?

perfect credit score

By Eric Rosenberg

The most popular credit scoring models have a scale that tops out at 850. This means the best possible credit score you can ever have, using the FICO and VantageScore models, is an 850. But do you really need an 850 credit score?

In most cases, there is no benefit to a perfect credit score. Instead, you should simply focus on getting a score in the “excellent” credit score range. Read more to learn why.

Is an 850 credit score possible?

It is possible to get an 850 credit score. In my entire life, including my time as a bank manager approving credit cards, mortgages and lines of credit, I’ve seen it one time. I sat with my dad, who has a credit history with more years than my age, and pulled up his score on Credit Karma. He had the coveted 850.

But in reality, his 850 credit score is worth little more than a credit score of around 780 and above. Once you reach the top tier of scores, you will be approved for virtually all loans with the best interest rates – if the rest of your personal finances are in good shape. Odds are, with an 850 credit score, you have things well under control.

Just focus on an excellent credit score

Most banks, credit card companies and other lenders offer the best rates and approval odds to anyone with a credit score of around 760-780 and above, though each financial institution has slightly different criteria. If your score is at least 780 or above, you will get all of the same benefits and deals that someone with an 850 score has in most situations.

The value of an excellent credit score can’t be overrated, particularly if you plan to buy a home with a mortgage loan at some point in the future. The difference in interest rates between someone with poor and excellent credit can easily be worth tens of thousands of dollars over the life of a mortgage. For higher value homes, it may be worth six-figures or more!

Similar savings apply to auto loans, credit cards, lines of credit, home equity loans and some student loans. Also, remember that with an excellent credit score, your approval odds are much higher than with a lower score.

How do you get to an 850 credit score?

If you are determined to improve your credit to reach that perfect score for bragging rights, you may have a long journey ahead. Your credit score is made up of a mix of factors. If you manage them all well, you can get the best possible 850 credit score.

Start by [keeping your revolving credit balances low](https://www.selflender.com/blog/credit-utilization "credit utilization") and consider trying to raise your credit limit. These are accounts like credit cards and lines of credit. Some experts a reasonable credit utilization ratio is when you keep the balance below 20% or 30% of your total available balances. In reality, however, the best balance to get the highest credit score is $0.

At the same time, you should never, under any circumstances, make late payments. You can use automatic recurring payments or sign up for payment reminders to help make sure you don’t miss a due date. Just one late payment will keep you from a perfect credit score for at least seven years.

You will also need a large mix of accounts to join the 800+ credit score club. The Self Lender Credit Builder Account counts as one credit line if you are a customer. Perfect credit requires a mix of both revolving and installment loans. Installment loans are loans with a fixed payment like student loans, a personal loan, a car loan or a mortgage.

Signing up for new credit can harm your score in multiple ways, and just an application or two in the last two years may keep an otherwise perfect score in the 780-849 range. New credit inquiries stay on your credit report for two years.

The most important things to do to improve bad credit are to pay off your credit cards and other installment loans and always pay every loan payment on time. If you focus on those two things, you will be in pretty good shape overall.

The benefits of a credit score of 780 or higher

The first benefit, which you can measure with dollars and cents, is interest rate savings. But the benefits don’t end there. You can get a lot more with an excellent credit score, such as exclusive products designed just for the most creditworthy borrowers.

For example, some of the best cash back, miles and points-earning reward credit cards are only offered to people with good or excellent credit. Depending on the card, you can get huge signup bonuses, free flights and hotel nights, or cash back to offset your purchases.

Credit cards are not for everyone. If you use them, you should be sure to never buy anything you can’t afford to pay off in full before the next statement due date. If you pay off your balance in full each month, you never pay interest. If you don’t use the card at all, you still get credit for an on-time payment.

The value of some of these cards can be massive. They offer added insurance, purchase protections, and other benefits in some cases. For example, many popular travel cards offer rental car insurance at no added cost.

Some elite cards will even pay for your hotel room if you get stuck somewhere overnight due to weather. Other benefits can include airport travel lounge admissions, free checked bags on airlines, automatic extended warranties and insurance in case a new purchase or cell phone breaks. Check the card’s benefits information online for the latest info on just about any popular credit card.

Can you still get denied for credit from lenders with an over 800 credit score?

If you have perfect credit, you can still be denied for new loans. If you have high debts overall or high monthly payments in relation to your income, you may still be denied a credit card or other loan. Check your credit report if you need to determine exactly how much you owe across accounts. With some services, such as credit cards that provide credit monitoring, you can review these numbers without having to download an actual copy of your credit report.

One of the major numbers a lender looks at when approving a new loan or credit line is the applicant’s debt-to-income ratio - also called a DTI. To find yours, add up all of your monthly minimum credit and loan payments on your credit report. Divide that number by your total monthly income before taxes and deductions. If your DTI is higher than 50%, you will probably struggle with some new loan approvals no matter your credit.

This shows that while your credit is incredibly important with your future borrowing and even current borrowing costs, you have to focus on your full financial health to get the best rates and products available.

Work for an excellent credit score, not a perfect credit score

Of all credit scores…

  • About 40% of borrowers have a credit score in the range of 750 or above.
  • 20.7% have a score of 800 or above, according to FICO data shared by The Motley Fool.
  • Just 1.5% have a perfect 850 credit score, according to a Washington Post interview.

It can take years, easily a decade or more, to build a great credit score. That’s why you should always be working on your credit. If you ignore your credit, even for a few months, you could end up paying for it for a very long time.

Instead, don’t tinker too much but make sure you handle all accounts as agreed. If you get new accounts when they make sense, keep balances low, and always pay on time, you will be destined for the best financial products and results. And maybe you’ll earn some bragging rights along the way.

About the author

Eric Rosenberg is the mastermind behind the Personal Profitability blog and podcast. He has both an undergraduate degree and a MBA in finance and his work has appeared in various media outlets.

Written on June 4, 2019

Self Lender is a venture-backed startup that helps people build credit and savings. Comments? Questions? Send us a note at hello@selflender.com.

Ready to join Self Lender?


comments powered by Disqus