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Why a perfect credit score doesn't matter

Being a financial perfectionist doesn't always pay -- it can be a lot of work for little reward.

By Credit.com Apr 11, 2014 1:14PM
This post comes from Adam Levin at partner site Credit.com.

Credit.com on MSN MoneyThere are some people in life for whom an A on a report card was never good enough, who idly wondered why they were never above the 99th percentile on standardized tests and relentlessly beat themselves up whenever they came in second.


In adulthood, some of those same people are relentlessly pursuing the highest possible FICO credit score -- an 850. I’m here to tell those people to stop.


Report card (© C Squared Studios/Getty Images)The idea of "gaming" your already-excellent credit score to drive it up is not going to benefit you in any substantive way -- there’s really no difference between the interest rates or credit terms offered to people with an 800 and those offered to people with the elusive 850. So gaming it doesn’t help anything but your ego.


Worse yet, if you don’t know exactly what you’re doing, you’re as likely to hurt your credit score as to help. The models used by FICO (and other scoring agencies) are deliberately not totally transparent and many things that people think will raise their credit scores -- like getting rid of their credit cards or keeping zero debt -- can actually lower their scores.


You might think that trying to get a "perfect" credit score is a crazy thing that nobody really does, but you’d be wrong. Jacqui Kenton documented her own obsession with getting an 850 even after experts told her that it did her little good.


And while the experts at Credit.com get many more questions from folks with low credit scores about how to raise them, we do get the occasional high score person who just can’t keep from trying for that elusive 850 even though it can be a ton of work for little actual financial gain.


If you really are absolutely intent on getting a boost, consider this: Credit card issuers report your monthly balance to the credit reporting agencies -- but they don’t necessarily report it on the day your bill is due, they may do it earlier. So if you wait until the due date to pay, even if you pay in full, it might look as if you have a higher balance than you really do. That throws off your credit utilization ratio -- one of the major factors that determine your credit score. If you make large purchases, you can keep those off your balance tally by making an immediate payment to your credit card company.


Similarly, many people think that the best way to improve a credit score is to close accounts --  but don’t do that! If you’ve had certain credit cards for a long time and always made on-time payments and never maxed them out, those are good cards to have around. Instead, set a couple of regular bills (like Netflix or your cellphone bill) to autopay with cards you don’t use as much but have had for a while, which will make you look like a responsible credit user.


There’s nothing wrong with monitoring your credit and your credit score. In fact, I encourage it. You can get a free copy of each of your credit reports  once a year, and you can monitor your credit scores using a free tool like the one on Credit.com (which updates two of your credit scores each month, explains them, and creates an action plan to help you improve them).


At the end of the day, however, the only reason you might need to boost an already-excellent credit score is if you think you might -- or know you will -- be experiencing an issue that could cause it to drop. But if you’re just doing it for the sake of being better than a handful of other people with excellent scores, maybe spend a little of the credit you have to do something fun -- see a movie, go to the theater or buy tickets to a baseball game. Any of those are a more enjoyable use of your time.


More from Credit.com:


15Comments
Apr 11, 2014 6:22PM
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At the rate this country is declining, good credit won't matter as much due to the fact fewer and fewer people will be able to afford much of anything.
Apr 11, 2014 6:24PM
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There was a time like 20 years ago when nobody even new what there credit score was. Now the banks in the USA have started this credit crap that make other countries laugh. Its a terrible system that discriminates against the middle class and poor. If you get sick or get a divorce good luck with your credit score. It should be were you work, money you make, period. Like other countries.
Apr 11, 2014 8:57PM
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We need "good" pay, not "good" credit.  If we had the one, we wouldn't need the other.  On the other hand, if we had "good" pay, we would probably have "good" credit.  If you have money, the finance companies want it, just like the government.
Apr 11, 2014 9:08PM
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I agree- the credit scoring system is terrible. It has far gone past any reasonable use, and is now only a tool for banks, lenders, insurance companies and many other businesses to whack people with huge fees, rates and interest rates and discrimate amongst the regular Joes. Come on people, credit card companies don't make their huge profits off the rich, they make it off the little guys with less then "acceptable" scores- these companies love it when you're late with a payment, because that gives them a reason to jack up your interest rate and slap a $39 late fee on you!  Doesn't matter if your other 100 payements have been on time- you're bad bad bad!

And, to add insult, I know of companies that will charge you a "Same Day" payment fee when you dare to make your payment on the day it is due!!

I hate the credit scoring system, and I hate that so much emphasis is put on it- it is nothing but a "tool" in favor of big business, and has little to do with the rest of us. Other countries should be laughing at us- we are messed up, and it shows in so much of how we do business and treat our citizens and consumers. 

 

Apr 14, 2014 10:43AM
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If you can't pay cash for it, with the exception of a house, you can't afford it. If you finance a house without a 20% down payment, with a mortgage longer than 15 years, without a fixed rate, and the monthly payment is more than 25% of your monthly take home pay, you can't afford it either.
Apr 14, 2014 10:13AM
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I never quite understood by there is three credit agencies and then the creation of the FICO scoring system. I recall the good ole days when people were more responsible minded and all a creditor had to do was contact Merchant's Credit Agency to check on the reliability of a potential debtor. I am paying off just one small credit card and don't plan on using one ever again. I'm paying with cash and if I don't have the money, I won't buy it at all.

Apr 11, 2014 4:24PM
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LOL are you kidding are you old enough to remember TARP!
Apr 14, 2014 11:29AM
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The state the economy is in these days I would say it is better to owe than be owed.
Apr 14, 2014 12:20PM
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770+ is good enough for me, so what if the rating goes to 850 cause nobody is prefect.
Apr 11, 2014 5:57PM
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" So gaming it doesn’t help anything but your ego."

Ego would be reflected in not needing a credit score, borrowing is self indenturing, not borrowing is living free and under your own conditions, that were earned ............. unless you got that way like oblamo did, the same way slave owners did, on the backs and at the expense of others labors!


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