To inspire you to achieve the highest score, that goal is 850. The last time I read an article from the WSJ (maybe two years ago); only 3 million U.S. adults have the perfect score. It’s one thing to reach for it, but it’s another to keep it, perpetually. It demands lots of financial discipline.
Here are some financial tips to get there: 1) Merely paying your bills on time is no longer enough. Don’t get me wrong about this fundamental habit; the consequence of not paying what you owe on time is the ding on your credit history every time. Since we’re talking about shooting for the highest score, you’ve got to do more than pay on time. Instead of paying one time per month, why not do two payments per month or on a bi-weekly basis? Show the credit card companies how prudent you are. 2) Spend no more than 10% of the credit limit, consistently. If your credit limit is $1,000, then the magic number for you not to cross is $100. Think creatively in advance what you can do with a $100 budget. Could it be your gas bill, eating out, books, etc? Use your imaginations, and best of luck!
The highest possible FICO score is 850, the lowest is 300.
Your credit score is calculated from your credit report and there are many different ways of doing this. Here is a good post about your credit report versus credit score.
The concept behind the FICO score comes from the Fair Isaac Corporation, they apply different weightings to components of your credit report such as:
- Payment history
- Accounts owed
- Length of credit history
- New credit
- Credit mix
In general, a FICO credit score above 650 is considered good, although many people strive to be above 750. It is practically impossible to score a perfect 850 FICO score because there are a lot of different items from your credit report which go into calculating your FICO score. Keep in mind that different lenders (mortgage, credit card, automobile loan) will use different methods of credit scoring to assess your credit risk.
Your FICO score is used by creditors to determine the overall credit risk of any individual consumer. This score is calculated by using a proprietary tool developed by the Fair Issac Corporation (NYSE:FIC). Each major credit bureau in the United States - Experian, Equifax (NYSE:EFX) and TransUnion - uses Fair Issac's technology to calculate a FICO score for any borrower. The more information the credit bureau has on you, the more accurate their calculation of the FICO score will be. This is why you may have a different FICO score from each of the three major credit bureaus.
FICO scores range from 300 to 850, where 850 is considered to be the best score achievable. According to myFICO.com, a division of the Fair Issac Corporation, only 13% of the U.S. population has a FICO score greater then 800, while only 2% has a FICO score lower then 500. The largest proportion of the population, 27%, has a FICO score between 750 and 800. (To learn more about how your FICO score is calculated, see How Is My Credit Score Calculated?)
If your FICO score is not as high as you would like it to be, there are things you can do to improve it. First of all, be sure to keep all of your bills current and in good standing. Always pay your bills when they come due, never make any payments late, and pay more than the minimum balance on your credit cards or pay them off completely if you can. The longer you have a good payment history, the higher your credit score will be.
Here is my article on FICO scores - https://kjhfinancialservices.wordpress.com/2010/03/31/what-is-your-credit-score/
What is your credit score and does it matter? The most commonly used credit score is the FICO score and it really matters to your financial health. The FICO credit score was created by Fair Isaac Corporation in 1958 and it has stood the test of time. Based on the company’s scientific analysis and calculation, they determined the highest score will be 850. Congratulations to all of you with the highest score! However, for most people, their score does not reach those heights. Each lender has their own way of interpreting the score. Most lenders agree that any score above 750 is considered excellent, scores around 650 are fair and scores under 600 are considered poor. The closer you are to a 750 score, or above, the more likely you will be approved by the lender and pay lower interest rates. Next, let’s take a look at ways to give your FICO score a turbo boost.
The first and most important is to pay ALL your bills on time. Late payments and not paying those bills can really hurt your score. Next be sure and keep balances on credit cards as low as possible. Paying off debt is a much wiser choice than moving debt from credit card to credit card. Pay off the credit cards with the highest interest rates first. Every time you apply for and open a new credit account your score goes down, so be wise with those applications received in your mailbox. Raise your score by having lower balances compared to your credit limit and maintaining a longer credit history.
Your FICO score summarizes your credit risk and is based on your credit report. You must request and inspect your credit report at least annually. Each year you can receive a free copy of your credit report from www.annualcreditreport.com. There are a number of other websites that say you will receive a free credit report, but if you have to provide a credit card to get a free report then it is not really free. Only www.annualcreditreport.com provides ‘free and no strings attached’ reports. Reports are provided from the three major credit reporting agencies (Equifax, Experian and TransUnion). Once you have your reports in hand, do not stop because you still have work to do. Verify the reports and determine if there are inaccuracies. Clear up anything that is not correct by contacting the credit reporting agencies with the correct information. Inaccurate information can cause you to be denied credit or pay a higher interest rate.
Kim Howard, CFP
I believe the highest score is 850, however, most of the population don't come anywhere near that. If you have a score in the high 700's or low 800's you are in great shape and should be able to get a very competitive rate on a loan.