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Your credit score is one of the most important financial factors, as it dictates how much you can borrow for life’s major expenses. Buying a home, purchasing a car, renting a new place, and even securing a new job are all dependent on having a strong credit score. Based on your financial track record, your credit score can range wildly over time, between 300 and 850. The perfect credit score is on the high end of that range, at 850.
Credit scoring comes in a variety of forms based on the company or model behind a particular rating. For instance, the FICO credit scoring model – the calculations used by the majority of lenders and creditors in the United States – ranges from 300 up to 850, with 850 representing the highest possible credit score.
In recent years, VantageScore has come into the credit scoring mix, developing its own model for calculating individual scores. The range for VantageScore credit scores under an early version of the model is 501 to 990, with 990 being the perfect score. However, VantageScore 3.0, the most recent model, has a range in line with FICO scores, from 300 to 850.
Is It Possible to Reach Perfect?
The short answer is yes, but there is no simple equation for, or way to, reaching the perfect credit score. Those who have either a FICO or VantageScore of 850 have followed similar paths to achieve a strong financial track record, including borrowing enough, but not too much, repaying all their bills on time and in full, and utilizing available credit in a responsible way. Here are a few points to consider when working toward a perfect credit score:
- Payment history accounts for 35% of your total credit score, so it is necessary to keep up with credit account due dates with diligence.
- The amount of debt you have at any given time, compared to the amount of available credit you have counts for a significant portion of your score. Keeping credit utilization to 30% of available credit is key to achieving a perfect credit score.
- Variations of debt also matter, meaning borrowers with on-time payments and responsible use of credit with both installment debts (loans) and revolving debts (credit cards and lines of credit) are more likely to have a perfect credit score.
Credit Score Lows
As difficult as it may seem to achieve the perfect credit score, having the lowest possible score is not as easy as many think. Yes, credit scores take a substantial hit when there is a history of missed payments, delinquencies, or accounts that have found their way to collections. However, in most cases, these negative marks have a time limit, meaning your credit score will improve when payment history and credit utilization gets better over time.
To get the lowest credit score possible of 300, though, individuals would have to have no positive credit history at all. This means zero on-time payments, multiple negative or collections accounts, and maxed out credit cards. Even when these factors are in play, credit scoring models rarely give an individual a credit score of 300.
Author: Jeff Gitlen