Money expert says Americans who obsess over an 800 credit score are ‘crazy’ — once you hit this benchmark you can ‘give it a rest’

Understanding credit scores

Reaching a credit score between 800 and 850 often requires meticulous financial management, including maintaining low credit utilization, having a long credit history and managing multiple types of credit accounts effectively.

Credit scores are numerical representations of your creditworthiness, based on various factors reflecting your borrowing and repayment behaviors. Credit card debt is a closely watched barometer of consumer financial health, and many Americans still carry a balance on their credit cards from everyday expenses.

The most commonly used credit scoring model is FICO, which ranges from 300 to 850. Here’s a breakdown of the key components that make up your FICO score:

Payment history: This is the most critical factor and includes your record of on-time payments on credit cards, loans and other debts. Late payments, defaults and bankruptcies negatively impact this aspect.

Credit utilization: This measures the amount of credit you use compared to your total credit limit. Keeping your credit utilization below 30% is recommended to maintain a healthy score.

Length of credit history: A longer credit history can positively impact your score by providing more data on your debt behavior. This includes the age of your oldest account, your newest account and the average age of all your accounts.

Types of credit: Having a mix of credit types, such as credit cards, installment loans and mortgages, can enhance your score because it demonstrates your ability to manage different kinds of credit responsibly.

New credit: This includes the number of recently opened accounts and credit inquiries. Too many new accounts or inquiries in a short period could be seen as risky behavior and can lower your score.

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Improving your score

If you’re below 760, getting to that benchmark is genuinely attainable.

“I’d rather you be happy once you’re in the golden range,” Howard says. “You don’t need to take out other forms of debt or try to manipulate your score. You’re already qualifying for the best loans and the best loan rates.”

You can reach 760 by reducing the balances on your credit cards, which will lower your credit utilization ratio and positively impact your score. Focus on paying these bills on time. Payment history is the most significant factor affecting your credit score.

Next, aim to keep your credit utilization ratio below 30% of your total credit limit. Paying off credit card balances in full each month helps. Also, consider keeping old accounts open, as the length of your credit history matters, even if you no longer use certain accounts frequently.

Additionally, be mindful of how often you apply for new credit, as multiple hard inquiries in a short period can temporarily reduce your score.

Regularly checking your credit reports from all three major credit bureaus (Equifax, Experian and TransUnion) for errors or inaccuracies is also a good idea. Consumer Reports reported that 443,321 Americans filed complaints against all three credit bureaus in 2023 in their credit score. Disputing and correcting any mistakes may help improve your credit score.

If possible, ask a trusted family member with a strong credit history to add you as an authorized user on their credit card account. This can add their positive payment history to your credit report, boosting your score without requiring you to use the card.