They say you can have a credit score as high as 850. Supposedly a credit score of over 700 is good enough. So my question is does it even matter?
You might do a few tenths of a point better on loan rates. Depending on the size of the loan, that could be a little or that could be a lot.
It does matter a little, it can get you a better rate on a mortgage. I think that is about all though. 800-850 is effectively all the same.
700 is excellent, unless you’re looking to get a mortgage soonish, I wouldn’t worry much about it.
As others have said…
It matters at the edge, but not much at the middle.
Want to buy a used Toyota with little money down? You’ll get the same loan with either 700 or 800+. Want to buy a used Ferarri with little money down? Not gonna happen at 700, but it’ll be “Yes, Sir!”, and the loan will be cheap if your score is 825+.
At 700 you’ll occasionally get a junkmail offer for a low rate credit card you don’t need. At 825+ you get a few junkmail offers per week. If you weren’t going to accept any of those offers then getting more of them is a nuisance, not a help.
etc.
When I leased my car 3 years ago they asked if I knew my score. As it happens I had just received an email from Experian congratulating me on my 843. The salesman gave me a “Wow”. Of course as soon as I signed the lease the credit score dropped about 20 points. It took several months to recover.
A few weeks ago the lease was paid up and I decided to purchase the car. The new payment was only $60 higher. No matter that I had just made 36 payments on time and was just refinancing the same car, they dropped my score again. Idiots.
I have always paid everything on time, have no long term debt and plenty of cash. I had one credit card that I’d had for over 10 years. About 4 years ago I got frustrated with several instances of poor service from my credit card company so I cancelled it and got a new one. My credit score dropped almost 100 points due to “credit age” and still hasn’t fully recovered. The whole credit score system sucks.
I wonder if you’d have done better if you kept that card, but only used the new one.
Similar story for me. Recent big spend drops score instantly; full payoff of big spend 30 days later recovers score some, but not completely.
But I would not say the system “sucks”.
I will say, like most everything else, it’s designed to be of value to its customer. Who are the lenders, not the borrowers. Just like using Google or watching TV, we’re the product not the customer. And we should not ever forget that. As The Rock used to intone on WWE: “Know your role!” And in the Rock’s case, the person he was intoning to’s role was to be thrashed for the next 10 minutes then slink off in shame. If he could still walk.
And it’s especially biased towards early detection of people getting in over their head because that’s the people lenders especially don’t want to lend to.
I’ll also comment that like most things, it’s designed work well enough in the middle of the bell curve of [whatever], with some concomitant dumbnesses at the edges. If you’re somebody who resides at the edges, prepare for some dumbnesses.
Aside…
While researching my comments I found a pretty good article from about a year ago. A 700 score now is far from exceptional; roughly 2/3rds of all Americans who have scores at all have scores >= 700.
Lots of interesting demographic breakdowns here with citations to the sources.
I agree with this.
If you handle your financial affairs in order to raise your credit score, or keep it high, beyond paying all your bills on time and not missing payments, then (I am convinced) this is somehow better for the credit rating organizations and/or their owners, not necessarily better for you. They can cheerfully bite my hairy behind.
In retrospect that’s certainly true. Someone (maybe even on this board) advised me so at the time. But I rather childishly wanted the satisfaction of telling the old company that I was leaving because of their crappy customer service.
There is a difference between US credit scores and others. In Canada, it’s typically a pass/fail. In the US you hear things in ads like “Lease rates as low as 2.9% for well qualified buyers” and the credit score can influence the borrowing rate.
In May I sold my rental home, paying off the small mortgage balance. The only remaining active credit I have is a credit card I use for subscriptions, etc (paid in full each month) and a credit card I purchase on once or twice a year to keep active and pay off immediately. My FICO dropped from 850 to 827 because of a lack of installment loans. My VantageScore dropped 3 points. I’m at the point where I’m being penalized for not having active debt, regardless of my history.
Fortunately, I don’t really foresee needing credit to purchase anything for the rest of my life. If I want to do some major rehab to my house, I might finance it rather than taking it out of my investment accounts.
StG
For darn sure the whole concept of a credit score starts to become less meaningful for a retiree with assets. Which many of our audience here are.
Bragging Rights