Credit score

What is the highest credit rating?

A high credit score is a good thing to have. But what is the highest credit score, and is achieving it a realistic goal?

More importantly, is it a goal worth pursuing?

What is the highest possible credit rating?

FICO and VantageScore, the two best-known credit scoring products, both use scales ranging from 300 to 850. The highest possible credit score is 850.

Credit bureau Experian reported in 2019 that just 1.2% of Americans had that elusive 850 score.

The good news, however, is that you don’t need to have a perfect credit score or even a score above 800 to qualify for the best interest rates and credit card perks.

The benefits of having a high credit score

There are quite a few advantages to having a high credit score – 740 or more – although a perfect score won’t earn you much more than a high score (more on that later). But if you have a high score, here’s what it gets you.

Reduced rates on mortgages, car loans and insurance

A high credit score will save you money on mortgages, insurance and loans.

The most common term for a fixed rate mortgage is 30 years, but even shorter mortgages typically last at least a decade. It takes a long time to pay interest. The highest credit score you can get will help you get a lower interest rate, which could save you tens of thousands of dollars over the life of the mortgage.

Although on a smaller scale, the same is true for car loans.

Rates vary from state to state, but My Auto Loan, an online auto loan marketplace, estimates you could earn an interest rate of less than 3% for a $20,000 loan with a score of credit above 800. However, if your score is below 600, that interest rate could be as high as 17%.

Credit scores can also affect how much you pay for home and vehicle insurance.

Better Credit card

Along with your income and work history, a high credit score makes it much more likely that you’ll be approved for the credit card you want. For most people, that means a card with a big credit line, a good interest rate, and other perks.

These benefits sometimes come in the form of “rewards” such as cash back or points that you can use for travel. According to Experian, you need a credit score of 670 or better to qualify for the typical rewards card. And as you can imagine, the higher your score, the more valuable the rewards you qualify for.

Best rates on Refinancing

One of the most popular reasons to refinance a loan is to get a lower interest rate. If your credit score has improved by 50 to 100 points or more since you got the loan, your new score could qualify you for a lower rate and help determine if refinancing the loan is a good idea.

If your credit score has improved from 655 to 760, myFICO estimates that your new interest rate will be 1.043% lower. That’s a savings of $172 per month on a $300,000 mortgage.

A higher credit score may also allow you to get a lower rate for refinancing an auto loan. More on that here.

Factors to consider when aiming for the highest credit score

So how do you increase your credit score? There are many ways to improve your credit score because several factors are used to calculate it.

Factor Importance
payment history
(how often you pay your creditors on time)
Amounts due
(total amount you owe to all your creditors)
Length of credit history
(how long has your credit been established)
Composition of credit
(how many different types of credit do you have)
New credit
(all lines of credit you opened in the last two years)

Here’s what you can do to improve your scores in each of the above areas.

Payment history: Make your payments on time

Payment history is the most determining factor when it comes to credit score. It simply means paying your bills on time each month.

Amounts Due: Keep Them Low

Credit usage (or amounts owed) is the percentage of credit you are using out of all the credit you have. For example, if you have a credit card with a line of credit of $5,000 and you have a balance of $1,000, your credit utilization rate is 20%.

Clark strongly recommends keeping your credit utilization below 30%. Better yet, keep it below 10%.

“Thirty [percent] is the target, but I would also say it’s the ceiling,” Clark says. “It’s very common for someone to have about 50% usage, and you’re like, ‘Oh, I’m fine. I’m only using half of the credit that’s available to me.

“But you’re out of the comfort zone based on historical averages of when you’re likely to ‘whistle’ on that credit and maybe get to a point where you can’t make a payment on time.”

That doesn’t mean you shouldn’t use your credit cards. If you have a credit utilization rate above 30%, but pay the full bill, your figure will bounce back.

And one way to prevent your credit score from “yo-yoing” during months when you used your credit card a lot is to make multiple payments. Even making two monthly payments instead of one can prevent the credit utilization rate from exceeding 30%.

Asking for a higher line of credit to reduce the denominator in the formula can also help.

Length of credit history: build over time

This factor in your credit score may be the simplest: the age of your credit accounts. If you’ve had your credit cards and mortgages for 15 years and you always pay on time, your credit rating will be higher than someone with the same accounts and payment history, but accounts that don’t. are only five years old.

So all you will need for this factor is time. And that’s why you should keep old credit card accounts open.

Credit mix: add different types of credit

Your credit mix refers to different types of credit. Generally, someone who has credit cards, a mortgage, and a car loan will do better here than someone who only has credit cards.

To improve your credit mix, you could get a low-interest car loan, as suggested by Beverly Harzog, credit card expert for US News & World Report. You can also take out a small personal loan and repay it on time. Opening new credit won’t help immediately, but after about six months of paying the loan back on time, your score should go up.

New credit: limit your requests

Applying for a new credit card or loan will lower your credit score for several reasons.

First, the application for a new credit leads to what is called a “thorough investigation”. This is when a lender or company checks your credit to determine if you are an appropriate risk. A thorough investigation usually lowers your score by a few points.

The second reason is that opening a new account shortens the average length of all your credit accounts and thus reduces your credit history.

Once you start using a new credit card, if you make all your payments on time and your credit usage remains low, your score will rebound.

But choose your apps wisely. You will hurt your score with multiple hard demands by asking for too many cards too quickly.

When it comes to a mortgage or car loan, you have a bit of leeway so you can shop around for rates without the tough demands damaging your credit. Multiple inquiries for a new auto loan or new mortgage count as one serious inquiry if made within the same time period. FICO and VantageScore both define this period as two weeks.

Why You Shouldn’t Worry About Achieving the Highest Credit Score Possible

It’s important to change your financial habits to get the highest possible credit score. But reaching 850 is not achievable for everyone.

Clark recommends aiming for 760. That’s when you’ll start to see the same benefits as someone with a score of 800 or higher.

Credit card expert Beverly Harzog agrees: “If you can score around 760, you’ll get the same perks, the same offers, as someone with an 840 score,” she said. .

Final Thoughts

Even though 850 is the highest possible credit score, you don’t need it to enjoy the benefits of a high credit score.

To improve your score, pay your bills on time, keep your credit usage low, work on building your credit history, but be judicious when applying for new credit. And know that even reaching 760 can net you the best perks available.

More content from