Two years ago, I began an every-other-day ritual of checking my credit score. And that ritual gave birth to a mission: I'm shooting for 850, the perfect score.
If my score changes, I will often call my parents to conference about it (whether they want to or not). I recently gave an impromptu subway lecture about the importance of your credit score for future purchases to a friend who funds his life with a debit card, which doesn't build credit. Though I haven't quite reached the point of bringing it up on dates, I may have a preferred range of credit scores in mind.
I can pinpoint the moment when I became this way. It was the day I learned — while reading a LearnVest article, in fact — the definition of one little phrase: credit utilization.
Credit utilization, one of the factors that has the highest impact on your credit score, is the percentage of your total available credit that you are currently using (you can calculate this by taking the total of your credit card balances and dividing it by the total of your credit card limits). Those with the best credit scores keep their credit utilization rate below 30 percent.
Up until that point, I'd assumed that I had as good a credit score as was possible for a 21-year-old. When I turned 18, I opened a credit card, which I paid off in full and on time every month. But this whole credit utilization thing appeared.
That same day, I created an account with Credit Karma, which provides free credit scores, and the rest is history. I spent two hours absorbing every chart and graph on the page, learning about the factors that contribute to my score. I scrutinized my credit "report card," which summarizes how I rank in each of the factors. Luckily, my credit score was nowhere near as abysmal as I feared it would be, clocking in at around 730.
Still, I started to change my behavior: I paid down my bill if it got too close to that 30 percent mark during the month, and made a mental note to get my credit line increased once I got a full-time job.
Apparently, I'm not alone in my case of mild credit psychosis. Al Bingham, a consultant, consumer advocate and author of "The Road to 850," a comprehensive guide to how credit scores work and how to improve yours, says that he gets numerous phone calls and emails every day from people seeking guidance about reaching that golden number.
Is a perfect score even worth it?
"It's important to understand that if you have a FICO score above 760, you're going to be getting the best rates and opportunities," says Anthony Sprauve, director of public relations at FICO, the analytics company whose credit scores are most often used to determine a borrower's reliability. "While it's nice to aspire, you really don't need to," he says.
According to Bingham, a perfect 850 may not even be possible.
"The highest I've ever seen was an 847," says Bingham, who tracked 1,500 credit scores for several years while researching scoring systems. Sprauve says that when FICO examines credit scores, they do so in ranges, so even if someone did have an 850, they'd never even see it.
So, you may ask, why bother?
"It's a pride thing," Bingham says. "Everyone wants to have achieved the highest score possible. When I encounter people who have an 820 or 830, they're always trying to get their credit score higher. It's a challenge to them. I haven't come across anyone who has a very high score and just says, 'It doesn't matter any longer, I'm high enough.' "
Still, Sprauve cautions that when you reach the upper echelons of credit scoring, it becomes more difficult to maintain your score. "Once you start to get near perfect, any misstep will be a bigger hit to you than to someone with a middle-of-the-road score, because his or her mistakes are already reflected in their scores," he says.
The cult of 850
Andrew Schrage, co-owner of Money Crashers Personal Finance, is one of us: A fellow credit crazy who, like me, has taken up the quest of achieving a perfect score.
"When I signed on the bottom line for my first credit card, I had a game plan going in of never carrying a balance," he says. "I stayed true to that strategy from day one, and I've definitely benefited from it. My credit score is high because I've made it a priority in my life."
I only had one credit card, with a low limit of $700, since I was in college and only employed part time. Never one to carry around cash, I used the card for most of my expenses, including groceries, books, gas and entertainment. This brought my balance up to about 50 percent of my limit more months than not.
Even though I always paid my bill in full at the end of each month, I learned that depending on when the bank reported to the credit agency, my score could be taking a hit for my relatively high credit utilization.
Although Schrage acknowledges that one could attribute his desire to "a certain degree of vanity," there are other reasons that motivate him. "I know many employers track credit scores, so if I ever need to look for employment in the future, not only do I want to stand out from the rest, I want to be the best," he says.
Looking to boost your score?
Although it may be a fool's errand, the experts did offer some tips for boosting your score.
"Credit scoring is pretty black and white, there are very few nuances," Sprauve says. Achieving a high score requires three basic components: never make a late payment, keep low balances on your credit cards, and only open new lines of credit when you need to.
Although these nuggets of wisdom are crucial for anyone trying to build or maintain a healthy credit score, I wanted more. After all, I was already doing each of these things.
So I decided to pick Bingham's brain to figure out what exactly I could do to take my score to the next level.
The secret to boosting my score
I gave him the following snapshot of my credit situation: Three active accounts (two credit cards and one student loan), average account age of three years and three months, 1 percent credit utilization (woo hoo!), 100 percent of payments made on time. I also had a recent hard credit inquiry from when I increased the limit on my credit card, and had also recently paid off and closed two small student loan accounts.
After I described my situation, Bingham expressed surprise that my score — 741 — wasn't higher. What I said was: "Hmm, why do you think that may be?" But, secretly, I was scandalized. What could I be doing wrong?! I wondered.
We pulled my credit report, and Bingham found that on my remaining student loan, the total balance, including interest, was higher than the initial loan amount. He was right: I didn't have the money to start paying my loans down when I was still in school, and when my repayment period started, I'd focused on other loans. Rectifying this, he told me, could raise my score 40 to 60 points. Fireworks shaped like a giant 800 exploded in my head.
After receiving Bingham's diagnosis, I was so thrilled with the prospect of increasing my score so significantly that I could barely keep myself from running out of my office to throw money at my loan. (Note: I can do this because I have six months of expenses in my emergency fund and don't have any credit card debt.)
Although it may be pointless — or even impossible — I'm going to keep trucking along toward my perfect score. See you at the finish line.
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