Perfection is a lofty goal, but it’s not always realistic – or necessary.
So it is with an individual’s credit score, that gnarly number that banks and lenders rely on when granting mortgages and loans. It’d be great to have the perfect credit score (which happens to be 850), but it’s not necessary.
When it comes to credit, very good is good enough. Being diligent about paying bills on time and being faithful about paying bills on time every month will get you where you need to be – which is at a score of 760 or higher.
Credit scores are a quick assessment of a borrower’s track record on paying bills, and help lenders gauge how trustworthy a borrower will berepaying money. The better the history, the higher the credit score. Originally designed to provide lenders quick insight into a borrower’s payment record, credit scores now are used by employers, utility companies, landlords, cellphone carriers and even insurance companies to financially evaluate customers.
The scored is calculated on a range from 300 to 850, and the nation’s average is 703. Less than 2% of consumers hit the perfect 850. The remaining 98% of the nation fills in the variety of credit score ranges
About 25% are in the 740-799 range, which lenders consider worthy of the best loan terms and interest rates. Another 21% are good (670-739) and receive slightly less favorable loan terms and interest rates.
The key is getting from good to very good, which experts say is 760 or above. Because in the real world, a score of 760 should earn borrowers the same benefits (lower interest rate, better credit terms) as those above 800.
WalletHub posits that a credit score of 760 “is not a good credit score; it’s an excellent one.” And SmartAsset reports that a credit score of 760 or higher should lead to the lowest interest rates on a loan.
John Ulzheimer, who has spent a career working in credit rating, told CNBC Select that the best interest rates for car loans are at 720 and above and for mortgages 760 and above. Jim Droske of Illinois Credit Services said that those above 760 or are “getting the best you can get.”
“You’re already hitting that pinnacle of what lenders care about,” Droske told CNBC.
He adds that in practical terms, a perfect score of 850 is no better than an “imperfect” 760.
So while we can still strive for perfection, be proud if that score is 760. And keep in mind the words of Tolstoy: “If you look for perfection, you’ll never be content.”