NEW YORK (MainStreet) — You want a super high credit score. Once you clear that near-impossible 800, you're going to have the keys to the kingdom. That's where you start getting all the super low-rate, extra high perk credit cards and rock bottom mortgages, right? Wrong. In fact you'll probably be surprised at just where the benefits of having a high credit score top out.
What does an ultra-high credit score really get you?
When asked what an ultra-high credit score gets you, Mike Sullivan, director of education with Take Charge America, is very candid. "Nothing but the respect of the loan officer," he says.
Lenders are free to establish any lending criteria they want, provided they don't violate the law. But Sullivan says that he's not aware of any advantages that an 825 credit score has over a 780.
Randy Padawer, a consumer advocate with LexingtonLaw, tells a story about his father pulling his credit report and seeing that he had "only" an 810. "He was really angry that it wasn't higher," Padawer says. For his own part, the younger Padawer thought it was funny. He believes the benefits of having a good credit score significantly diminish over 720. At 720, you're going to start qualifying for the best rates. At 740, you're going to start getting approved for almost 100% of the best loan products available. "At that point, the only thing standing between a consumer and the loan they want are other factors," he says, naming income as the biggest one. Income, of course, is not a factor when it comes to figuring your credit score.
The role income plays
But surely if you have a score over 800 you'll qualify for top-notch credit products, such as the famous Centurion Card from American Express, right? Wrong. In fact, whether you get a Centurion or similar product has more to do with how much money you make and how much you spend on your credit card than anything. American Express will be far more interested in how much you spend on your card than your credit score. Once you hit that 720, you'll probably qualify for the card — provided you're using enough of your credit to make it worth their while to make the offer.
"You have to remember what FICO scores are supposed to measure," Padawer says. "It's not measuring how smart you are financially or if you're a good investor. It only measures how likely you are to repay money, how profitable you are likely to be for a lender." What this means is that someone with an 850 credit score is the most perfect and profitable customer for a bank. But the actual benefits for customers top out somewhere between 720 and 780.
"If you find that you have a FICO score of 830, that's a fun thing to brag about at your neighborhood bar, but that's all it's going to do for you," Padawer says.
What to do once you start getting a high credit score
Sullivan says he used to be obsessed with his own credit score, getting very upset if it went down by eight points. But he learned that there's virtually no difference between an 810 and an 820. "Seven-hundred-and-eighty is a great target," he says, "but beyond that it doesn't make a lot of difference." So what do you do once you score hits 780? "I'd be more focused on my credit report than my credit score," says Sullivan, who says that he rarely checks his own credit score now. He does, however, watch his report. "As long as there are no mistakes there, my credit score is going to remain high enough," he says.
Padawer notes that a credit score exists on a kind of bell curve. While adding 10 points to an already high IQ score will make a difference, and each quarter-inch in an NBA player's vertical jump matters, the same isn't true for credit scores. "If you have a 350 and your friend has a 450, neither of you are qualifying for anything," he said. "Once you hit the low 500s, you start qualifying for loan products. That curve increases and builds to around 720 and starts leveling off again." In other words, people at one end of the bell curve won't qualify for another. People on the other end are going to qualify for just about anything their incomes can support.
So follow Sullivan's lead. If you have bad credit, work on fixing that. Your score will follow your responsible behavior. And if you already have a good credit score, don't worry so much about making it even better. There's just no reason to put your brain power there.