By Megan Doyle | American Express Credit Intel Freelance Contributor
5 Min Read | November 30, 2020 in Credit Score
A small percentage of Americans have a perfect credit score, but it’s important to understand that perfect isn’t permanent.
Credit scores, by nature, are bound to fluctuate by a few points every so often.
Perfecting your credit score might not be necessary to get the best interest rates on credit cards and loans – excellent credit is typically good enough.
The average FICO credit score in America has been steadily growing since 2013.1 As of 2019, the average score stood at 703, which is considered good credit. But what about the elusive perfect credit score of 850? Though rare, it is possible to get a perfect score – but it can be a challenge to maintain. The good news is that you don’t need a perfect credit score to reap the benefits of having great credit. Let’s see what a perfect credit score looks like, why having excellent credit is deemed by experts as good enough, and what you can do to improve your credit score – and maybe hit a perfect 850.
Yes. An Experian study found that as of 2019, 1.2% of all credit-holding Americans had a FICO score of 850.2 A perfect score generally requires years of exemplary financial behavior, like making on-time payments, keeping a low credit utilization ratio, and maintaining a long history of credit accounts. A wide credit mix and only a few hard credit checks also play a role in boosting your credit score.
But a perfect credit score can be as hard to maintain as it is to get. For example, if you pay off a loan in full – an admirable financial move that can free up your finances for savings and other purchases – you’ll decrease your credit mix, which can drop your score as much as 15 points. And even if you maintain a wide credit mix for an extended period of time, it’s important to remember that your credit score is a snapshot of your credit history at any given moment and so is bound to fluctuate every so often.
It might be surprising to know that people with perfect credit scores do in fact use credit, take out loans, and carry debt. The distinguishing factor is how they manage their debt. One study found that Americans with perfect FICO credit scores tend to have more credit products in their name but carry less debt than those with average – yet still good – FICO scores. Specifically, perfect scorers had an average of 6.4 credit cards but only about $3,000 in debt, compared to the national averages of 3.8 credit cards and roughly $6,500 in debt, according to the same Experian study mentioned above.
The bottom line? Those with perfect credit scores tend to display their ability to keep debt down while having many credit accounts, among other positive factors that affect your credit score.
Though a perfect 850 credit score is a commendable goal, experts suggest good-to-excellent credit is typically high enough to ensure your chances of getting approved for credit cards, loans, and mortgages with better interest rates and loan terms. And it’s much easier to achieve. In fact, 58% of Americans already have a FICO score of 703 – which is right in the middle of the “good” range – or higher.3
Still, the higher your credit score, the better your chances of locking in lower interest rates – with one caveat. Lenders generally don’t distinguish between a score of 800 and 850. Some experts go as far as to suggest there may not be additional benefits for FICO scores beyond 760, indicating a score in the high 700s may, in many cases, be as good as perfect. FICO’s Loan Savings Calculator, for example, shows a score of 760 might secure you as low an interest rate on a loan as a score of 850.4
Still, if a perfect credit score is your goal, you may want to consider these expert credit tips compiled from credit score perfectionists:
It’s certainly possible to get a perfect credit score, but even if you do, your score likely won’t stay at 850 forever. Common financial moves – like applying for new credit or paying off a loan in full – will cause dips in your score, but that doesn’t mean you’ll have less-than-stellar credit. Anything over a FICO score of 760 is generally enough to help you reap the hard-earned benefits of excellent credit.
1 “What Is the Average Credit Score in the U.S.?,” Experian
3 “What Is the Average Credit Score in the U.S.?,” Experian
4 “Loan Savings Calculator,” myFICO
5 “Getting Into the 800 Club Is Tough—Staying in Is Tougher,” The Wall Street Journal
6 “What is Payment History?,” myFICO