Why You Shouldn’t Care About Having an 850 Credit Score (and What to Do Instead)

Holly Johnson

October 20, 2017  •  4 Minute Read

Credit Basics

If you’ve been trying to improve your credit, you probably already know that your FICO score is a numeric measure of your credit health. Depending on how your credit looks, your score will fall somewhere between 300 and 850, with a higher score representing better credit over all.

According to myFICO.com, FICO scores are usually divvied up in the following tiers:

• Exceptional – FICO scores of 800+
• Very good – FICO scores 740 – 799
• Good - FICO scores 670 – 739
• Fair – FICO scores 580-669
• Poor – FICO scores 579 and lower

While a FICO score of 850 is seen as the pinnacle of good credit, it’s interesting to note that basically any score over 670 is seen as good – and that scores over 740 are seen as “very good.” According to myFICO.com, a score over 740 is even all that’s typically required to qualify for the best loans and rates, or for the top travel rewards credit cards.

Scores over 740, notes myFICO, are “above the national average and borrowers in this range are at a great advantage in both the likelihood of getting credit approval and being offered lower interest rates.”

Why You Shouldn’t Shoot for a Perfect Score

This just goes to show that shooting for a perfect 850 FICO score is probably a lost cause. If a score of 740 or better is considered very good or better than average, then what’s the point of shooting for greater heights?

In short, there’s almost no point in working too hard to achieve the perfect credit score. You won’t get a trophy for climbing the FICO score scale to 850, nor will you likely qualify for any benefits you can’t get with a “good” or “very good” FICO score.

Keep in mind that your credit score is nothing more than the measure of how well you borrow money. So, achieving a perfect score doesn’t mean anything except you’re great at racking up debt and making payments to keep yourself afloat.

Instead of Shooting for an 850 Credit Score, Do This

This is why the exact number of your credit score is a detail you shouldn’t stress over too much. You want your credit score to be good or very good in order to qualify for the best interest rates and loan terms, but achieving an 850 score is a complete waste of time.

If you’re angling to improve your credit score, your best bet is ignoring the number and taking steps that will add valuable depth to your credit report while putting you in the best financial position possible.

Here are some tips that can help you build and maintain good credit, regardless of your score:

Pay your bills on time.

According to credit reporting agency Experian, delinquent and late bills can have a major impact on your credit score. Further, 35 percent of your FICO score is determined using your payment history as a guide. To have the best chance at good or excellent credit, make sure all of your bills are paid on time every month.

Keep your balances low.

The second biggest determinant of your credit score is the amount of money you owe in relation to your credit limits. This – and the fact you should strive to avoid debt – are some reasons to keep your balances low. Many experts suggest making sure you use no more than 30 percent of your available credit at any given time.

Don’t open or close too many accounts.

While there’s nothing wrong with getting a rewards credit card or taking out a personal loan if you need one, it’s important to note how opening new accounts can impact your credit. Generally speaking, “new credit” makes up 10 percent of your FICO score. Opening new accounts sparingly can ensure your credit won’t take a hit due to too much new credit.

On the flip side, you should try to keep old accounts open as long as you can – even if you’re not using them. Because the length of your credit history makes up 15 percent of your credit score, old accounts can add depth to your credit history and boost your score.

Don’t just move debt around.

This tip comes directly from credit reporting agency Experian. “Pay off debt rather than moving it around,” they write on their website. In other words, don’t just sign up for balance transfer cards and debt consolidation loans to make your debt easier to handle; actively work to pay it off so you can keep your credit in good standing and avoid financial perils like delinquent payments or bankruptcy.

“Also, don’t close unused cards as a short-term strategy to improve your credit score,” they write. “Owing the same amount but having fewer open accounts may lower your credit score.”

The Bottom Line

If you’re discouraged because you haven’t been able to achieve “perfect” credit, it’s time to throw those expectations out the window. The truth is, a FICO score of 850 won’t leave you any better off than any score in the 800’s. And since “very good” credit includes any FICO score over 740, it’s unlikely you’ll have any advantage over someone whose score is in the mid-700’s, either.

So, what should you do instead? Your best bet is making sure you’re taking all the steps to keep your credit in tip-top shape. By paying your bills on time, keeping your debts low, and not overdoing it in terms of new credit, you can ensure your credit will always be good enough.

One of these days, you’re going to need good credit to buy a house, finance a car, or borrow money to build a business. Good credit can make all of these dreams come true and then some, but a FICO score of 850 won’t leave you better off.