Why a Perfect 850 Credit Score Doesn't Matter

For a lot of people, their goal is to achieve a perfect credit score of 850. There are a few beliefs associated with a perfect credit score:

1. You'll receive better interest rates for a mortgage, which is true (bear with me).
2. Lower interest rates on your credit cards.

Mortgages

With mortgages, the rule of thumb is you need a 750 or above to get the best interest rates. These interest rates are crucial because adding a few points to an interest rate can translate to a few thousand dollars.

Even if you have a credit score of 800 or 820, you're still going to receive the same interest rate as someone with a score of 750. After consulting with a few experts in the space (my local bankers), they recommended a credit score between 720-740.

A good analogy for this is to imagine that you're in college and the highest test score in the class was an 89. Even if you scored a 90 or 100, it doesn't matter because the class would be graded on a bell curve. With a score of 89+, you're at already at the top of the class, and any number above will still grant a 4.0 GPA.

Credit Cards

The second reason people want to achieve a higher credit score is to receive lower credit card interest rates. In most cases, credit card interest rates shouldn't matter because you should not keep a balance on your credit card in the first place.

Factors that impact your credit score the most

The factors that impact your credit score the most are credit card utilization, payment history, and derogatory marks.

What surprises most people about total number of accounts is 0-5 cards is considered very poor. Most people who have an 800+ credit score have 15+ credit cards.