Like seeing your name next to the high score of a retro arcade game, knowing you have the highest credit score possible comes with ultimate bragging rights.
As one of the metrics financial institutions use to gauge your creditworthiness, your score is a measure of how easy it is for you to get a personal line of credit.
An 850 — the highest score in both FICO and VantageScore systems — makes borrowing simple. It also gets you VIP access to rates and terms, making the loans you do get more affordable.
But do you need to hit the high score of your finances to borrow wisely?
Short answer: nope.
Why You Don’t Need a Perfect Score
While this shiny score is something to marvel at, it’s not absolutely necessary to buy a home, get a car loan, or use a line of credit.
Even people with bad credit can do most of these things. What differentiates these borrowers from people with perfect credit are the rates they end up paying.
Because of these rates tend to be higher, these loans and lines of credit play a specific role in your finances. The experts at CreditFresh recommend using a personal line of credit for bad credit only when your savings fall short of unexpected emergency expenses.
What Do You Get with a Perfect Score?
Generally, a score of 850 gets you the best rates on a personal loan or line of credit. But it’s not the only way you may access these deals.
If you have a score of 760 and above, you tend to have access to the same kinds of rates and terms as someone with a score of 850. This means there may be no need to for a perfect credit score, as long as you can boast a super-prime rating.
This takes some of the sting out of falling short of achieving this number, doesn’t it?
What if You Have a Less-Than-Perfect Score?
If everything from 760 and above gets you the best opportunities, what does everything from 759 down do?
Well, it depends on how far down the scale you fall — which bottoms out at 300, according to both FICO and VantageScore systems.
For those somewhere between the best and worst scores, you probably have no problem getting funding when you need it. Firmly in the middle of the pack, you’re likely offered average rates when you borrow. Your options won’t be too expensive, but they won’ t be too cheap either.
As you inch closer towards 300, you’ll notice the selection of loans you qualify for reduces and your rates increase. But very few people have the absolute worst score possible; less than one percent of consumers hit rock bottom.
Most subprime borrowers have higher scores, which means they have options. Remember this if you realize you have less than stellar credit the next time you need help in an unexpected emergency.
In the meantime, create good money management habits to build positive credit history in your record. Pay bills on time, tweak your budget to save more, and reduce how often you tap into a line of credit. Over time, focusing on making these habits stick may be more effective than concentrating on earning a perfect 850.