How Good Does Your Credit Score Really Need to Be?

Here's when you can call it a day and stop worrying about your credit.

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By now it's common knowledge that you need a high credit score. Under the FICO system, which is the most popular and widely used option, scores range from 300 to 850. Being closer to the high end of that scale can save you a lot of money and make your life much easier.

You don't, however, need that elusive perfect score of 850. When it comes to credit scores, "good enough" may be all you need, and it may even be better for you than chasing perfection.

Why you don't need a perfect credit score

With credit scores, there comes a point when your score is high enough to qualify you for any credit card you want, as well as the lowest interest rates banks offer on loans, including mortgages.

Once your score is at that point, there's no tangible benefit to improving it more. Let's say you're applying for a mortgage and you can qualify for the bank's lowest interest rates with a credit score between 760 and 850. Whether your score is a 765, an 800, or an 850, you'd get the same rate.

The big question, then, is at what point your score is sufficient to qualify you for all the lowest rates.

When is your credit score good enough?

For most consumers, a FICO® Score of 760 to 780 is a great goal. If you want to err on the side of caution, then you can aim for an 800.

If you're interested in the more in-depth explanation, here's what kind of credit score you'll need to qualify for different financial products:

  • Credit cards: A score of 720 or higher will qualify you for just about all of the best credit cards.
  • Mortgages: A score of 760 or higher gets you the lowest interest rates with most mortgage lenders.
  • Personal and auto loans: A score of 720 or higher qualifies you for the lowest loan rates.

As you can see, you don't have much to worry about credit score-wise once you have a score of 760. And if you're not interested in buying a home, then you could get away with a 720 or higher. Still, it is wise to get your score a bit higher than the low end of those thresholds to give yourself some wiggle room, as credit scores can fluctuate from month to month.

Keep in mind that a high credit score doesn't guarantee approval for anything. It can qualify you for the best financial products and the lowest interest rates, but it's not the only factor banks will consider when evaluating your application. Your income and other parts of your financial history will also come into play.

What to do when you reach your desired credit score

After you've gotten the credit score you want, all you need to do is maintain it, and that's easy enough. To keep your credit score from dropping, you must:

  • Make your bill payments on time. Payment history is the biggest factor in your FICO® Score, and even one missed payment can bring your score down by more than 50 points.
  • Don't use too much of your available credit, as credit utilization is the second-biggest factor in your FICO® Score. Always keep your credit card balances under about 25% of your total available credit (the combined credit limits of all your credit cards).

Those are just two of the factors that affect your credit score, but since they're the most significant, focusing on those two alone is usually enough to maintain your score.

You shouldn't, on the other hand, worry too much about avoiding hard inquiries on your credit or opening new credit accounts. Although both of those things can affect your credit score, neither has a large impact. If you have the opportunity to earn a big sign-up bonus or get a card that can earn you more cash back, you shouldn't pass it up just to save a few points on your credit score.

Knowing when to call it a day

Your credit score is obviously a big deal, but once you hit the mid- to high-700s, you reach a point of diminishing returns. If your score keeps increasing, that's great. Just make sure you aren't missing out on other opportunities solely to max out your credit score.