Credit Scores: How High is “Good Enough”
You’ve probably heard the saying that almost only counts in horseshoes and grenades… but what if it also applies to your credit score? Well, according to some experts, there really is a threshold where your score is considered “good enough.” Any efforts to boost your score higher than that might actually be a waste of time.
So, what is this “good enough” threshold and why should you stop worrying about going any higher than that?
What’s A Good Score?
If you know your credit score, you probably also know where you fall in the rating categories. But depending on which scoring model you use, this “grade” could vary quite a bit.
Take the FICO scoring model, for instance, which is the golden standard among lenders today. With the FICO 8, you can have a score anywhere between 300 and 850. Your credit score is Exceptional if it’s above 800, Very Good between 740 and 799, and Good if it’s 670 to 739.
Therefore, anything above 670 is technically “good.” A score into the 700s, though, can lead to you getting the financial products, interest rates, and even loans that you want most.
What’s the Difference?
If the FICO 8 scoring model goes all the way up to 850, it stands to reason that all of us should strive for that… right? After all, who doesn’t want to achieve perfection, especially when it comes to something as important as our credit.
Well actually, a perfect credit score is nearly impossible, no matter how low you keep your credit utilization and whether you’ve paid every single payment on time. Not only that, though, it’s likely to be a wasted effort, according to many experts.
If you have a very good credit score, you will likely have access to all of the financial products you could need or want. A very good score – ranging from 740 to 799 – will allow you to get a home mortgage at an enviable rate. It will open the door to approvals for some of the most coveted credit cards and financial products out there. And it will even ensure that your auto insurance premiums stay as low as possible.
While an excellent score (800+) is certainly enviable, though, it actually won’t do a whole lot more for you than that very good score would.
How High is High Enough?
When it comes to credit, a very good score may actually be good enough. Anything above that nets you some serious bragging rights, but it might not result in much else.
According to Greg McBride, a chief analyst for Bankrate,” Once you’re above 760, you’re getting the best rates.” This means that the typical American will already qualify for the loans, credit cards, and financial products that the need or want, without needing an exceptional credit score. He also says, “that’s why obsessing over a score of 800 versus 820 is largely a waste of time.”
While there may be a few exceptions, the difference between a credit score in the high 700s and one in the 800s is negligible. Interest rates can only go so low and the best credit cards can only be so exclusive. For the most part, whatever you qualify for with a credit score around 760 is what you’d qualify for with an 820 score.
Why You Should Still Care
Of course, this doesn’t necessarily mean that you should ever stop caring about your credit score.
Monitoring your score (and your credit report) is imperative to tracking your progress and preventing fraud. There are plenty of ways that you can get a free score and report each month, whether through services like Credit Sesame or even through some credit cards.
You should also always work to improve your credit history and make responsible financial decisions. Paying your bills on time, every time is a given, and you should also work to keep your balances as low as possible. This does as much for your credit score as it does to keep you out of financial trouble.
However, if you have a very good credit score, you probably don’t need to obsess about getting that number to “perfect” status. Everything you need is likely already available to you by the time you hit 760 or so – beyond that, your efforts are really only going toward cool points.