Do You Need a Perfect Credit Score?

Man holding credit score scorecard.

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Perfect credit is extremely hard to come by. The question is: Is it really necessary?Image source: Getty Images.

During my grade school days, I was often tempted to strive for perfection by scoring 100 on tests. As an adult, I took that concept one step further by aiming for a perfect credit score.

Credit scores can range from as low as 300 to as high as 850, and at one point, I took pride in the fact that I actually managed to achieve the latter end of that range. That pride, and score, however, were short-lived, and it taught me a valuable lesson: Perfect credit isn't easy to come by. It's also not necessary.

How credit scores are calculated

There are several components that go into determining a credit score, some of which carry more weight than others. Here's the breakdown:

  • Payment history (35%), which measures how timely you are with paying bills. Paying on time and in full will help with this aspect.
  • Credit utilization ratio (30%), which represents the percentage of available credit you're using. You should always aim to keep this number at or below 30%.
  • Length of credit history (15%), which is the amount of time you've held your accounts. Retaining old accounts in good standing is useful here.
  • New credit accounts (10%), which refers to new credit cards you apply for or new loans you take out. Opening too many at once can hurt your credit score.
  • Credit mix (10%), which represents the variety of accounts you have open (keeping in mind that there's a difference between having a mortgage and carrying a credit card balance).

If you manage to hit all of the above points in unison, you might achieve a perfect credit score for a few days, weeks, or maybe even months. But few adults manage to maintain a perfect credit score for the long haul.

For one thing, you might reach a point in your life where you need to apply for new credit accounts. Doing so could ding your score temporarily in that arena, thereby dragging your otherwise perfect number down.

Furthermore, keep in mind that there are three major bureaus that track credit -- Experian, TransUnion, and Equifax. Some lenders report into all three bureaus, and some don't. As such, part of your payment history might be missing from one bureau, or several, thereby causing your score to dip. It's also possible for you to have a perfect credit score from one bureau, and a lower score from another (though the chances of you having a superb number from one bureau and a terrible score elsewhere are pretty slim).

The punchline: Maintaining perfect credit is something even the most financially responsible folks often can't do. So rather than fixate on that 850, aim to keep your score as high as possible. Paying your bills on time consistently is probably the single most important thing you can do to maintain good credit. After that, keep your utilization low. This means that if you have a total line of credit in the amount of $10,000, aim to never have more than $3,000 worth of charges outstanding at once.

Keeping old credit accounts open is another good way to boost your score. Hang onto that old credit card you never use anymore but have had since your teenage years it if it isn't costing you an annual fee. Similarly, avoid applying for too many new credit cards at once, and aim to have a healthy credit mix (meaning, not just store cards, but rather, a variety of credit accounts). Doing these things will bring you as close to perfection as you're able to get without driving yourself up a wall.

Aim for excellence, not perfection

Any credit score in the 800 to 850 range is generally considered "excellent," while 740 to 799 is considered "very good." Fall into either category, and there's a strong chance you'll get approved for any reasonable loan or line of credit you apply for, and at a favorable interest rate. Or to put it another way, your financial circumstances are unlikely to change regardless of whether you have a credit score of 820 versus 850.

If you want to make yourself crazy in an effort to achieve perfection on the credit score front, by all means go for it. Just know that once you attain that 850, the only thing it's really going to give you is bragging rights.

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