Do You Really Need a Perfect Credit?

Everyone knows that a higher credit score is better. Does that mean you have strive for the perfect score?  Is it really possible to ace the FICO scoring system?

Understanding the FICO Scoring System

The FICO model is the most widely used scoring system in the US.   It used by the three major credit bureaus and recognized by lending companies, insurance companies and other financial institutions.   The FICO score ranges from 300 to 850, with 850 as the perfect score.   So, how is your credit score calculated?

There are five categories in the FICO scoring model. These are payment history, length of credit history, types of account, credit-to-debt ratio, and credit inquiries. Your payment history comprises 35% (the largest percentage) of your total score.

Lenders have varying standards when it comes to judging credit worthiness based on the scores.   For instance, one creditor may set 775 to 850 as an excellent rating while other creditors may be more lenient and consider 750 as the cut-off for an excellent score.

You do not necessarily need to achieve the perfect score of 850, as long as you reach the bracket of what lenders consider to be a good rating. To be safe, you want to keep your rating at 750 and above.   A score of 700 may still be considered as a good rating but a higher score would be more impressive.

What happens if your rating falls even just one point below 700?  Some lenders may still give you a higher rate – given to customer with average credit.   This is where raising your score by   even a few points can make a difference.

Maintaining a Healthy Score

How do you keep your credit score in safe range?  First, be consistent and timely with your payments.   Next, you need to be careful on using your credit lines.   Even if your credit card offers a low APR, you don’t want to use up more that 50% of your available credit.   Keeping your charges minimal is the key.

What about applying for multiple credit cards?  According to the Consumer Credit Counseling Services, a person with too many credit card accounts may actually send out a negative impression to lenders.   You will be seen as a high risk borrower. Unless you have a very good reason to own ten cards, three or two credit cards should be enough.

Lastly, check your credit report regularly. It is not unusual for reports to have errors or false charges. If you do not dispute them right away, these errors can pull down your score. Ideally, you want to order a copy of your report from the three major credit bureaus at least twice a year.   If you discover errors, send a dispute letter to the bureau that issued your report immediately.


  1. Great article.. I have been wondering how FICO works,, at least i have the idea now..


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  2. Nice article with accurate facts. Given that the national average credit score is 650, 700 is great in many people’s eyes.

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  3. @Grace

    You’re much welcome.

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