Here’s What Happens When Your Credit Score Hits 850
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Here's your money briefing for Monday, January 13th. I'm J.R. Whalen for The Wall Street Journal. The average credit score in the U.S. is 717. So what does it take to boost your score to a perfect 850? It's become an everyday obsession for some Americans, including one man who spoke to our reporter Amani Moise.
The first thing that he tried was closing some old retail credit cards. But that was actually a mistake because when you close old cards, you lower your utilization, which could actually decrease your score. The next thing that he did was that he zeroed in on his credit card balances, trying to keep his utilization within a golden range so that he could perfect his score.
So what happens when you reach a perfect credit score? It doesn't really matter.
What percentage of Americans have a perfect 850 credit score and why does it matter?
Amani will join us to go through the numbers after the break.
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The credit reporting firm Experian says about 1.5% of consumers have a perfect credit score. How much does hitting that milestone really matter? Wall Street Journal reporter Imani Moise checked in with a Texas man about that, and she joins me. Imani, you spoke with Steve Michel, who achieved a perfect score. Why was that important to him?
Well, usually people care about their score when they're about to buy a house or maybe buy a new car so that they can get the best rate on whatever loan that they're applying for. But Steve wasn't interested in applying for a loan. He's an engineer by trade, so everything has to be perfect. And he saw his score going higher and higher, and he wanted to figure out how he could crack 850.
How long did it take him?
It took years because he only got an updated version of his score once a month. That means he would have to test out a strategy, wait a month to figure out if it was successful. And then if not, he needed to test a new strategy and wait another month. In total, it took about five years for him to feel comfortable that he's cracked the code.
At one point, his score was already in the 840s, nearly perfect. What more did he have to do to push it to 850 and then keep it there?
He tried a lot of things. The first thing that he tried was closing some old retail credit cards. But that was actually a mistake because when you close old cards, you lower your utilization, which could actually decrease your score. The next thing that he did was that he zeroed in on his credit card balances, trying to keep his utilization within a golden range so that he could perfect his score.
When someone's score hits 850, what happens? Is there any significant change in their credit profile?
Not much. And I know that's an anticlimactic answer and it can be hard to believe. 850 is the highest credit score that you can get in most scenarios. But when it comes to how much you're going to pay for a mortgage or the interest rate on an auto loan, there's really not that much of a difference between an 800 and an 850 and even a 750 and 850.
What's the takeaway from most other people whose goal it is just to keep up with their bills?
A lot of the financial advisors that I spoke to, they emphasized that you shouldn't be focusing on your credit score for the sole purpose of focusing on your credit score. They compared that to going on a diet and only counting calories without taking into account the nutrition of what you're eating. The credit score should be seen as an outcome. And usually when you're taking good financial steps, paying your bills on time, it'll go higher naturally. So if you focus on the important things, then a higher score will be a byproduct of that.
You mentioned that it doesn't make much of a difference if someone's score falls from 850 to 800 or even down to 750.
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