Is it Worth Trying to Get a Perfect Credit Score?

Your credit score is what determines whether you’ll be approved for credit. It’s a factor whether you’re applying for a new credit card or a mortgage for your first home. You might think that the best thing to do is to strive for a perfect credit score – but is it worth it?

Perfection may not be possible in every case. The real question to ask, though, is this:

"Is perfection necessary?"

In this article, we’ll answer that question – and give you some guidance to help you decide where your score needs to be to achieve your financial goals.

What is a Perfect Credit Score?

Let’s start with a quick review of the credit scoring system. It runs from 300 on the low end to 850 on the high end. What do these scores mean? Here’s a refresher:

0 to 349 means that you have no significant credit history
350 to 649 indicates a severely damaged credit history
650 to 699 indicates damaged credit history, with late payments and other issues
700 to 749 indicates a good credit history, with reasonably low credit usage and few delinquencies
750 to 850 indicates excellent credit

A perfect score would be a score of 850. It’s more achievable than you might think – but we should still ask whether perfection is necessary.

How to Get a Perfect Credit Score

Your credit score is determined by five key factors. Each plays a role in your score, but some are more important than others. Here they are:

Your payment history. The way you have paid your bills in the past indicates how creditors can expect you to pay in the future. This is the most important element of your credit report, and it accounts for 35% of your score.
Your level of debt. This element is worth 30% of your score, and it has two parts. The first involves your overall debt – how much do you owe? The second compares your outstanding debt to your credit limits. People who use a higher percentage of their credit (a number known as credit utilization) will receive a lower score than those who use only a small amount of their available credit.
The age of your credit. If you have a card or mortgage that you’ve had for years, it’s worth more than a new account. Your credit’s age is worth 15% of your total score. In other words, if you have a long credit history, you’ll likely have a higher score than someone whose credit is new.
Credit diversity. Creditors prefer to lend to those who have a mix of revolving credit (like credit cards) and installment credit (like mortgages). The diversity of your credit counts for 10% of your score.
New accounts. Any time someone checks your credit, as they do when you apply for a credit card or loan, it has a small impact on your credit score. Applying for several new accounts at the same time can lower your score. This factor is worth 10%.

Reviewing these factors, here are the things you would need to do to work toward a perfect score:

Make your payments on time
Keep your balances reasonably low when compared to your available credit
Maintain existing accounts to establish a long credit history
If you can, have more than one kind of credit
Avoid applying for new accounts unless necessary

If you are building your credit, it may take time to do it. However, it is certainly possible for you to be one of the 1% of Americans who has a perfect credit score.

Do You Need a Perfect Credit Score?

The big question here is, do you need a perfect credit score? If you want to buy a home, you may think that having an immaculate credit report is the key to being approved.

To answer, let’s go back up and look at the credit score ranges. As we stated above, anybody with a credit score of 750 or higher is considered to have excellent credit. Most lenders will give preferential treatment to any borrower with a score above 700.

FICO, which issues credit scores, says that any consumer with a score over 800 is considered a “high achiever,” and other lenders have referred to people with 800+ scores as “super-prime.” In other words, they say no real risk associated with lending to people whose scores are in that range.

What does this tell us? Simply stated, you don’t need a perfect score to be considered an attractive, low-risk prospect by credit card companies, mortgage lenders and any other potential creditor. Their primary concern is knowing that you’ll pay your bills on time, and a score over 700 tells them that.

You may still want to pursue a perfect credit score. If you do, you can use the tips in this article to help you do it. Provided you pay on time and manage your balances, you can do it.

If you are looking to start building your credit, you may want to consider a credit card. Addition Financial has several options that can work for you.