Even as adults, we still worry about being graded. Instead of test results or GPAs, most of us are preoccupied with our credit scores. Conventional wisdom says that the higher the number, the better. We pay down balances, anguish over late payments, and worry we might not qualify for optimal interest rates on loans.
A good credit score is certainly useful. But according to experts, the difference between "good" and "great" may not have any real, tangible benefits.
Speaking with CNBC Make It, Bankrate chief analyst Greg McBride said that people in pursuit of a "perfect" score are wasting their time. FICO scores, which are calculated from data collected from the major credit bureaus, range from 300 to 850. At 650 or lower, you're going to be perceived as a risky borrower. At 700, you'll qualify for most loans or offers. But 800 or 850? According to McBride, it's a wash.
"Once you're above 760, you're getting the best rates," McBride said. A score of 780, 800, or 820 is not likely to have any dramatic impact on your eligibility or term details, making an obsessive pursuit for a "perfect" score largely one of self-gratification.
So what does 760 or above get you? Typically preferential terms that can save you thousands in interest over time. You could also qualify for larger loan amounts, although lenders will also be looking at your income and expenditures to inform those decisions.
The bottom line: By making payments on time, keeping track of your credit utilizations (typically borrowing no more than 30 percent of your available credit), and accumulating a credit history, you've proven you can manage debt effectively. That's really what lenders care about.
If you've been so diligent with keeping balances low and paying on time that you've achieved 850 without trying, you're in some very rare company. As of April 2018, only 1.5 percent of Americans had a perfect score.