FICO is the predominant system for calculating credit scores, producing scores that range from 300 to a perfect 850. In 2023, only 1.54% of U.S. consumers achieved a perfect score, according to data from Experian.
For those with credit scores near 850, reaching a perfect score might be an attractive goal, although achieving it can be quite challenging and may not be necessary for several reasons.
1. Limited Importance of Scores Above a Certain Level
According to Experian, scores between 800 and 850 are regarded as exceptional. This classification generally indicates a strong likelihood of loan approval or acquiring favorable credit cards, whether the score is 802, 820, or 850. However, other factors, such as income, can impact loan approvals. For example, an individual with an annual income of $50,000 may face challenges securing a $500,000 mortgage, not due to their credit score, but because of income limitations. Therefore, striving for perfect credit might not significantly affect one’s borrowing capability.
2. Mortgage Applications and Building Home Equity
New loan applications often slightly decrease credit scores because they result in hard inquiries on credit reports. This means that pursuing a perfect credit score could lead someone to avoid new loans, including mortgages. Yet, applying for a mortgage and building equity as the property’s value grows can be a sound financial decision, outweighing minor decrements in credit scores.
3. Financial Advantages of Credit Card Offers
Similar to loan applications, acquiring a new credit card may also slightly reduce credit scores. Nonetheless, securing a credit card with a lucrative sign-up bonus could offer more financial benefits than maintaining a perfect score. For instance, reducing a score slightly from 847 to 844 is unlikely to affect loan rates, but a $300 sign-up bonus is tangibly beneficial.
Ultimately, achieving perfect credit may offer a sense of accomplishment but adds limited practical value. Rather than focusing on achieving a perfect score, individuals might find greater benefit in striving to maintain or enhance their already strong credit ratings.
