It’s the Bigfoot of the financial world; a perfect credit score. AKA, the highest score a person can get. This mythical and elusive number for the FICO Score is 850. And, for those unaware, FICO Scores range from 300 to 850.
In reality, there are Americans with 850 FICO Scores. As a matter of fact, 1.6% of all FICO Scores currently stand at 850. Which, may sound dire considering that 11% of people believe that Bigfoot is real.
At the same time, obtaining credit with the best terms and lowest interest rates doesn’t require a perfect score. A score above 700 is considered good in most cases. What’s more, the “exceptional” range of 800 to 850 doesn’t usually make a difference to lenders. In fact, a score over 760 usually qualifies you for the best rate.
In other words, while achieving a good credit score is a great goal, getting to the top of the scale isn’t necessary. Remember that credit scores keep changing, so even ones that reach 850 don’t always stay there.
In light of the fact that the elusive 850 is only achieved by a small fraction of Americans, it can be valuable to examine the features of top scorers if you want to build your credit score.
What is a Credit Score (And Why It’s Important)?
Generally, a credit score ranges from 300 to 850. This three-digit number represents the risk lenders take on when lending money. Overall, a higher score typically indicates a better chance of approval — even though many factors are considered when calculating the score. In terms of credit scoring, there are two systems, FICO and VantageScore, with a few key differences between them.
More specifically, credit scores determine your eligibility for loans and your interest rate. The higher your credit score, the better. People with good credit (670 or higher) usually qualify for the best loan rates and terms.
You can save a great deal of money in interest by maintaining a good credit score throughout your life. Additionally, it can prevent you from paying some fees. As an example, if you take out a personal loan, a high credit score could help you avoid personal loan origination fees.
On the flip side, those with poor credit scores (below 580) or minimal credit histories may not meet lenders’ minimum credit score requirements. In turn, access to cash may be restricted. And, the most likely option is a bad credit personal loan or a loan with a co-signer or co-borrower.
But, that’s not all. Here are some other perks of having a higher credit score:
- Promotional deals and rewards from credit cards. You’ll most likely qualify for some of the best cash-back credit cards since they require excellent credit scores (700 or higher). Plus, you can qualify for a 21-month interest-free credit card with 0% APR on purchases and balance transfers.
- Insurance premiums are lower. You may be able to pay a lower monthly premium if your state allows credit-based auto insurance.
- The security deposit for an apartment is lower. A person with a good credit score will probably pay less of a security deposit when purchasing an apartment.
How Do Credit Scores Work?
Financial institutions commonly base their lending decisions on your FICO (Fair Isaac Corp.) score. However, there are many different credit scores. In fact, you don’t have a single FICO score. Each of the three credit bureaus, Experian, TransUnion, and Equifax, has one for you. As such, an individual’s FICO score is based exclusively on a credit report from a particular credit bureau.
Also, despite the fact that FICO has 50 different scoring models, your main score is based on the median score from the three credit bureaus, which may differ slightly. For instance, if your FICO score is 750 you have scores of 720, 750, and 770. So, it’s important to examine your credit reports closely since these three numbers are significantly different.
What is an Excellent Credit Score?
Again, there are different credit scoring models (FICO and VantageScore) and credit bureaus (Experian, Equifax, and TransUnion) that pull credit scores.
Based on Experian estimates, you can see where your credit score falls.
FICO Score
- Very poor: 300 to 579
- Fair: 580 to 669
- Good: 670 to 739
- Very good: 740 to 799
- Excellent: 800 to 850
VantageScore
- Very poor: 300 to 499
- Poor: 500 to 600
- Fair: 601 to 660
- Good: 661 to 780
- Excellent: 781 to 850
How Do You Get a Perfect Credit Score
Income, savings, and investments have no bearing on your credit score. It’s simply a measure of your debt management skills. A high credit score can be achieved by showing financial institutions that you are always able to repay your loans on time. Aside from on-time payments and low credit utilization, perfect scores are also distinguished by two other factors, notes the team over at Bungalow.
Perfect credit score holders:
- Have a greater number of credit cards. An average of 6.4 credit cards are owned by people with perfect credit scores, almost twice the national average of 3.8.
- Credit card debt is less. Perfect credit card scores averaged $3,025 in debt. Nationally, the average salary is $6,445.
What Factors Determine Your Credit Score
Based on which credit scoring model you use, your credit score will differ. These are the key factors considered by FICO and VantageScore.
FICO Score
- Payment history (35% of your score). An individual with perfect credit is likely to have a perfect payment history. Their credit reports do not contain any collections, late payments, or other negative information.
- Amounts owed (30%). Utilization rate refers to the percentage of your credit and loans that are used compared to your total credit limit. Ideally, this should be 30%. People with scores of 850, however, rarely use their available credit. The average credit utilization ratio of their credit cards was 4.1%, according to the same FICO report.
- Length of credit history (15%). How long have you had credit? Perfect credit score holders typically have long credit histories. According to a 2019 FICO report, the average age of their credit accounts was 30 years.
- New credit (10%). Those with the highest credit scores don’t open new credit accounts, although some do. The application process typically involves a hard credit inquiry that can damage your score by one to five points.
- Credit mix (10%). You have a variety of credit products, such as credit cards, installment loans, finance company accounts, and/or mortgage loans.
Each of these factors contributes to a range of credit scores:
- 300 to 580: Poor
- 580 to 670: Fair
- 670 to 740: Good
- 740 to 800: Very good
- 800 to 850: Exceptional
VantageScore
VantageScore is calculated based on five factors, although each doesn’t have a specific weight. According to VantageScore, available credit, balances, and total credit usage are the most influential factors.
In addition to credit mix and experience, payment history is also a significant factor. VantageScore still considers factors like age of credit history and new accounts opened, even though they are less significant.
Based on these five factors, there are five credit score ranges:
- 300 to 499: Very Poor
- 500 to 600: Poor
- 601 to 660: Fair
- 661 to 780: Good
- 781 to 850: Excellent
When it comes to offering credit, each lender takes a different approach — regardless of the score and ranking. Several lenders use an algorithm that reads more than just the score on credit reports. Those with lower credit scores who are improving their credit, but still need to improve it, will benefit from this.
Ways to Improve Your Credit Score
There’s no need to obsess over reaching 850. Remember, only 1% of consumers will ever get a perfect credit score. And if they do, their FICO score won’t stay high for long, since credit bureaus recalculate it constantly. So, you probably have a better chance of encountering Bigfoot.
However, those of you who are serious about hitting this elusive score should follow these steps.
Pay your bills on time.
Remember, 35% of your credit score is based on your payment history. Once your payment’s 30 days late, one of the three big credit bureaus will report it to Experian, Equifax, or Transunion. Having a late payment on your credit report for up to seven years can harm your credit score.
Using a bill management app, or enrolling in autopay, will decrease your chances of missing a payment.
Verify that your credit report does not contain any negative marks.
It’s possible that your credit reports contain illegitimate negative marks — even if you’ve never missed a payment. Get your free TransUnion and Equifax credit reports from Credit Karma and make sure they are error-free.
Dispute any inaccurate marks on your report if you find any. In response to a dispute, credit-reporting companies must investigate and fix errors as soon as possible.
Over time, negative marks on your credit reports should have less impact on your scores and eventually disappear.
Pay in full.
You should always pay at least your minimum payment. But it’s recommended that you pay your bill in full every month. Why? In order to reduce your utilization rate.
FYI, your utilization rate can be calculated by dividing your credit card balance by your credit limit.
Keep your hard credit inquiries to a minimum.
A hard credit inquiry is generated when you apply for credit of any kind. A hard inquiry can temporarily affect your credit score because it can be a sign that you are struggling financially.
You should only apply for new credit when necessary if you want to get a really high score.
Don’t cancel your cards without a reason.
Consumers with longer credit histories and lower credit utilization ratios are favored by both FICO and VantageScore.
The problem is that you can’t create 10 years of credit history by magic. The best thing you can do is keep one or two credit cards active and never cancel them. By having more credit cards in your name, you will not only be able to build a longer credit history, but you will also be able to keep your credit utilization rate low.
FAQs About the Highest Credit Score
1. What is the highest credit score?
The FICO score is the credit score most commonly used by lenders. It has a scale that ranges from 300 on the low end to 850 on the high end. FICO says less than 2% of U.S. consumers have an 850 credit score. But you don’t need to have the highest credit score in order to get the best available rates on loans. Credit scores of 740 to 799 are considered “very good,” while any score of 800 or higher is treated as “exceptional.”
2. What is the average credit score?
In 2021, Experian data showed that the average FICO credit score (scores maintained by Equifax, Experian, and TransUnion) for Americans was 716.
3. How does the average credit score differ by generation?
The following are the average scores by generation:
- Generation Z: 674
- Millennials: 680
- Generation X: 699
- Baby Boomers: 736
- Silent Generation: 758
4. What is the average credit score based on income?
American Express reports the following average credit scores by income:
- $30,000 or less per year: 590
- $30,001 to $49,999: 643
- $50,000 to $74,999: 737
Low average credit scores may be linked to lower income due to factors like higher-income individuals being able to pay back credit card debts (with lower interest rates) more easily and maintaining a lower credit utilization ratio. The credit limit of those with higher incomes may also be higher than that of those with lower incomes.
However, income is not the most reliable indicator of a score. A person’s income is only one factor that affects their credit score. It is still possible to have good credit and a low income. No matter your income level, don’t worry. Your credit score is not determined by your income.
5. How many adults never check their scores?
TransUnion sponsored a study conducted by Javelin Strategy & Research that revealed that 54 percent of adults do not check their credit scores.
To achieve your financial goals and correct any errors in your credit report, you must check your credit score. Use a third-party application or use an established credit reporting company like Experian to monitor your credit score on a regular basis, regardless of whether you use a credit card or pay back student loans.
