Is perfection worth it when you’re oh-so-close already?
When it comes to your credit score, attaining the top number may not bring as big a return as you might think – especially if your score is already the envy of most consumers.
This isn’t to say that you shouldn’t strive for the highest credit score possible. But the fact that you’re among the elite to begin with is already quite an achievement.
This subject came up after a longtime reader asked me how he could raise his already stellar credit score.
Phillip of Northeast Texas, who didn’t want to be identified more specifically, said he and his wife each have credit scores that range from 765 to 795, depending on the credit bureau.
“I would love to find a consultant that I could pay to look at our big picture, let me feed them some questions, then have them generate a list of suggestions to get us up and over 800. We are doing everything right that we can figure out.”
The widely used FICO credit score has a range of 300-850. VantageScore has ranges of 501 to 990 and 300 to 850, depending on which version of the scoring model is used.
Phillip and his wife manage their money well.
“We pay our bills when they come in – early – hoping to get credit reporters to show the best possible report,” he said.
They also have a good amount of savings for emergencies and retirement.
Phillip, 51, said his desire to raise his score above 800 isn’t ego-infused but was sparked by his desire to get a loan to build a new home.
“I know our credit score is a large component of what they will look at,” he said. “There’s no personal ambition involved in trying to exceed 800.
“My impression is you’re wasting your time trying to do anything over 800 because it’s not going to do anything for you. But I think over 800 is a laudable goal, and I think that a banker who sees it will be more impressed than a 795.”
I ran Phillip’s comments by John Ulzheimer, president of Consumer Education at CreditSesame.com,
“If they have scores already above 760 across all three credit-reporting agencies (Experian, TransUnion and Equifax), then they’re already in the best credit-score tier for all lending products, so there is no incremental value for having a higher score,” Ulzheimer said.
Still, a credit score above 800 does give the lender an indication that you’re not likely to default on a loan.
“The odds of missing payments is always lower as your score gets higher, even all the way to 850,” Ulzheimer said. “But that doesn’t mean you’re going to get a different reaction from a lender just because you’re an 800 instead of a 760. At some point you’re considered golden, and that’s if you have 760s across all three credit bureaus.”
Each lender sets its own underwriting criteria, said Jeff Scott, FICO spokesman.
“Achieving a perfect or near-perfect FICO score may help consumers in certain situations when they are applying for credit from lenders with stringent underwriting requirements,” he said. “However, it is rare that a lender will require a near-perfect score.”
Besides, “lenders will not typically have a special rate or loan for only those with perfect credit scores or scores within a few points of the highest score possible,” said Jeff Richardson, spokesman for VantageScore. “Those with very high scores typically get the best terms and rates for loans.”
What matters most is that you practice sound financial management instead of chasing a number. That means paying your bills on time and keeping your credit card balances low.
“The focus should not be to have a perfect credit score, as credit scoring is not a contest,” said Rod Griffin, director of public education at credit bureau Experian. “If you take care of your credit report, your scores will take care of themselves.”.
Pamela Yip is a personal finance columnist for the Dallas Morning News.