Fair Isaac Corp., the company behind the famous FICO score just released the new FICO 10 Model which is expected to cause the scores to fluctuate roughly 20 points. The change comes amid the average FICO score hitting a record high of 710 in 2020. According to data from Fair Isaac Corp, only 1.6% of the U.S. Population has a perfect score of 850. However, experts say that perfect scores might not matter as much as you may think.
While it is true that 850 may be the perfect score to get you all the financial benefits you may be looking for, some experts suggest that a 760 score will get you almost the same benefits as the ‘perfect score.’
Credit scores show whether you are a financial liability and a good credit score will help you as a consumer qualify for excellent rates in the market, credit cards, and good loan terms. With a 760 credit score, consumers are likely to qualify for the same credit cards, loans, and interest rates as a person having a credit score of 850.
“The best-published interest rates for auto loans are 720+ and for mortgages 760+,” financial expert John Ulzheimer, formerly of FICO and Equifax, tells CNBC Select. “As such, I always tell people, shoot for 760 or better. That way, they’re safe for all loan types and cards.”
To be on a much safer end, Jim Droske advises consumers to aim for a 780 score and with such a score, you will already be getting the best deals you can get. “If you’re above 760, or 780, certainly you’re already getting the best you can get,” Droske says.
FICO’s Stance about Having a Perfect Credit Score
Even the representatives at FICO say that having a credit score that is in the top 2% of the U.S. population will not give you any further benefits. As such, there is no need to worry about perfecting your scores.
“The reality is that, from the standpoint of qualifying for credit, it doesn’t matter whether you have a perfect 850 or a score just below that,” Ethan Dornhelm, VP of FICO scores and predictive analytics, tells CNBC Select. “To lenders, a consumer with a score in the 800s is a sparkling applicant.”
Does It Matter Have an Excellent Credit Score?
It does! However, if you have not reached the 760 marks, it is also okay. What matters is the effort that you are putting into it. The national average for the FICO score has been rising steadily to hitting a new high of 710 in 2020 as such, most people fall in this bracket.
The good news is that whether your credit score is ‘good’ or ‘excellent’ you will most likely qualify for the same best cards and all other benefits.
How To Get A Good To Excellent Credit Score
There are practices that you can maintain to help you achieve a good score. Here are some of the ways;
Maintain a low credit utilization rate
Credit utilization rate is a key factor making up 30% of your FICO score. This is a rate that shows how much of your available credit you can use at a given time. Research conducted by Experian shows that people with a credit score of 760 tend to have a credit utilization rate of 23.7%. This aligns with what most agents recommend, keeping the rate below 30%.
Make Sure to Pay Your Bills on Time
Your payment history is a crucial element that will affect your score to a large extent. Payment history accounts for 35% of your FICO Score. Data from Experian shows that most people with a credit score of 760 and above typically pay their bills on time and over 75% have a spotless late payment.
Track your Progress
Make sure to check your credit scores on a regular basis as you put in the effort to improve them. By doing this, you will be able to see what areas need improvement and work on them. In addition, tracking your progress will keep you motivated to continue with good financial habits thus raising your scores. At times, it is best to use a credit monitoring service that will help you track your credit and alert you where things change.