What is the Highest Credit Score Possible?

One of the most important numbers in your financial life is your credit score. In some cases, it’s more important than your age or even your income, but even more difficult to understand, especially if you are working on improving or building your credit score. From the time you can work, someone is going to tell you to build up your credit history and keep an eye on your credit score. This is true even if you never plan to buy anything on credit. So, what is the highest credit score possible?

According to the most recent methods used, a FICO score of 850 is the highest you can get, but also the most unlikely for several reasons.

How to Get Your FICO Score

Credit scores take quite a few things into consideration, but not every lender or credit score provider will have the same credit score for you. Although there are many different ways you can get a credit score, the FICO score is the one most commonly used by lenders when determining your creditworthiness.

Credit reports come from three major companies. Some lenders look at all three, some look at one, and some look at two. Experian, Transunion, and Equifax are well known as the companies who track and maintain credit reports. When all three of those scores are brought to light, the middle one is what is known as your FICO score. So, if Equifax shows a 780, Transunion shows 800, and Experian shows 790, your FICO score will likely be around 790.

Calculating Your FICO Credit Score

But what (or who) is FICO and how do they determine your credit score? The Fair Isaac Corporation, or FICO, uses a complicated algorithm to measure how you use your credit. It breaks your credit information down according to the following calculation:

• 15% for the length of your credit history
• 10% for new credit
• 10% for your credit mix
• 30% is based on the total amount you owe
• 35% is based on your payment history

This is how it would look if you were to break it into general categories. The problem for most people is understanding how they arrive at those percentages in the first place. For instance, 35% might be based on your payment history, but what does that even mean? Do you get a certain number of points every time you make a payment? Are those points divided out, multiplied by some unknown number, or added together?

Never mind asking when you really want to know why 30% is based on the amount you owe when some of that amount includes medical bills ... or does it? The truth is that expenses such as medical bills, which aren’t really credit-related, are probably considered differently in calculating your credit score than say, the loan for that vacation home in the Alps. And no one but the people at FICO know what the method is to arrive at the percentages that come together to make a credit score at any one of the credit bureaus.

Improving Your Credit

Today, using your credit seems to be one of the most important aspects of American life and it’s not just because you need a credit card for most online purchases, to book a hotel stay, or to rent a car. In most cases, you can get around these types of payments with a debit card from your bank. The problem is that you don’t have access to a credit line that can come in handy for emergencies or when you want to make a large purchase. Further, you need a credit score and a healthy credit history to purchase things like a house or a car.

One of the worst things you can do for your credit is not using it.

In fact, many lenders say that no credit is worse than bad credit. This is because they understand that sometimes things happen that are beyond your control, so getting behind on a couple of payments isn’t the worst thing that could happen. It’s not having the payments or credit accounts at all that could be even worse for your finances.

Since 35 percent of your credit score is based on your payment history, you have to have some sort of payment in order for this to figure into your score. Although 30 percent of your score is calculated from the amount you owe in comparison to the amount of credit you have available, it doesn’t mean owing more is better for your credit score if you don’t have the money to pay your debts.

Making timely payments is one of the most important things you can do to improve your credit score, but paying accounts off isn’t necessarily the best thing to do. Remember that 30 percent of your score is from the amount you owe, so you want to keep that number active. At the same time, using all of the credit you have available or maxing out your credit cards isn’t a good idea. Data suggests that using no more than 7 percent of the credit available to you is best for your credit score, or as much as 20 to 23 percent. In any event, keeping the amount you owe below 30 percent is recommended.

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Working Toward Perfect Credit

It’s almost impossible to get the highest credit score possible, simply because the numbers are always changing. Some of the things you are always paying on don’t even count on your credit history because they are considered necessary expenses. For instance, your electric bill doesn’t count toward your credit score, but you still have to pay it on time if you want a home loan because it is taken into account outside of your credit score.

Many people are almost offended by the use of credit scores and how they are calculated. After all, if you live within your budget and don’t buy things you can’t afford to pay for up front, doesn’t that count for something? The truth is that no, it doesn’t count for much when it comes to your credit score. However, it does mean that you probably have more available income that can be applied toward lines of credit. So, go ahead and pay cash if you want, but get a credit card for gas station purchases or just a general one that you use for expenses you would pay every month anyhow. Then, make sure you don’t go over 30 percent of your credit line and always leave a bit on your account. For example, if you have a $1,000 credit limit on your credit card, don’t use more than $300 a month. And, of course, be sure you make your payments on time every month if you don’t pay the balance in full.

So, what is highest credit score possible? The magic number is 850, but if you can get somewhere between that and anything over 650, you’re going to have more credit options than you probably need.

Christina Majaski More than 10 years experience covering credit cards and personal finance

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