Maximum Credit Score - Why You Don't Need The Perfect Score

A common question that many borrowers ask when it comes to borrowing money is what is the maximum credit score possible. There is not a easy answer to that question based on the simple fact that each of the 3 credit reporting agencies will give you a different credit score depending on the how they calculate your score. Also, lenders use additional in-house scoring models to calculate a persons credit score.

How Credit Scores Are Measured

However, there is one credit scoring system that the vast majority of lenders use and that is the FICO system. This was established in the 1950's by the Fair Isaac Corporation to assist large department stores to recruit new customers to their in-house credit card offers.

The credit score is a 3 digit number that is calculated based on a individuals payment and credit history. To measure the value of the score the FICO system uses a credit score range between a 300 minimum and a maximum credit score of 850. The FICO system is used by each of the 3 credit collection bureaus Experian, Trans Union and Equifax. Even though they use the FICO system the credit score they provide to people will vary between each bureau.

The reason why each score varies is a result of a number of factors. Although, the scores are FICO based each score can be different because the credit bureau will use their own variation of the FICO algorithm. Another reason is that not all lenders provide creditor data to each bureau.

In 2006 each of the 3 credit collection bureaus introduced a new credit scoring system to make matters even more complicated. The reason they introduced another scoring system was based on the claim that the Vantage score would streamline and balance the process and provide more accurate credit scores to consumers.

As pointed out earlier, there was a lot of variance between each of the bureaus FICO based scores. A credit scoring system that is used by each bureau would in theory create more accurate scores as the bureaus are using the same algorithm to calculate a score.

As with the FICO system the Vantage Score has a number scale with lowest score at 501 with the highest credit score being 990.

What Does A Minimum and Maximum Credit Score Mean

Where you rank on the credit score scale can have a huge impact on your financial life. The score is used by lenders to predict how you will pay your debts in the future and to determine your credit worthiness. They can do this by analyzing your credit history that is contained in your credit report. This will include important information relating to the your credit card transactions, the amount of debts you owe, your payment history, the number and type of accounts you use.

Your personal report will also record anything regarding bad financial decisions a long the lines of missed payments, loan defaults, foreclosures or bankruptcy. Any of these records can lower your credit score considerably.

Basically a good credit score means that you will qualify for the best deals on interest rates whereas a bad credit score means that borrowing can become very expensive.

Whichever scoring system is used achieving the maximum credit is near impossible and is not actually necessary. For example, the maximum FICO credit score of 850 is not necessary to achieve. What you really need to aim for is a score that falls within the range of 740 and 850 as this will be considered an excellent credit score by most lenders.

A rating below 740 does not mean that you will denied credit however, the lower it drops the more you will need to expect that average interest rates on loans and mortgages will increase.

A minimum credit score is also hard to achieve however, having a FICO rating above 300 or a Vantage Score above 501 does not mean that you are safe. Far from it. In the current economy the minimum FICO credit score that you need to qualify for a loan or mortgage is 666.

If you are a few points below,which most people are then, you will join a high risk group who are more likely to have their loan or mortgage application denied or at the very least be charged much higher rates of interest.

How To Get The Perfect Credit Score

As pointed out achieving the maximum score is impossible however, you don't need to. You really need to aim for is a 740 based on the FICO system. With the Vantage score you need to be aiming at a 850 and above.

If your current score is a few points below then you can give it a boost by changing a few things in the way you handle your finances. Check out the article how to improve your credit score in 3 simple steps for more tips and ideas on achieving close to a maximum credit score rating.

What Is A Bad Credit Score

Free Credit Report For Military

How To Read A Credit Report

Which Credit Report Is Best?

Restore Credit Score

credit score explanation

cic credit report

What Is Considered A Good Credit Score

Where Can I Check My Credit Score For Free

What Is The Highest Credit Score Possible

How To Get A Free Credit Check Online

Why Use A Three In One Credit Report