A consumer’s FICO credit score influences everything from having an apartment lease approved, to credit card interest rates and how favorable auto or mortgage loans are.
The higher your score, the better — but only to a point.
FICO consumer credit scores range from a low of 300 (lousy credit) to a high of 850 (a golden consumer in the eyes of lenders). But hitting the ultimate high of 850 is really just aspirational.
“Once you get beyond the mid-700s, it is really just bragging rights. Up until about 740 or 750, once you get higher than that, it’s just all excellent,” said Ted Rossman, senior industry analyst at Bankrate.
The average FICO score for consumers in the D.C. metro area is 709, according to WalletHub.
Consumers should strive for a FICO score in at least the mid-600s. But, while loan terms and interest rates become more favorable at that point, even small moves higher may have a big impact.
“Let’s say 660 versus 680 versus 700, every 20 points or so can make a big difference,” Rossman said. “It can be a quarter-point change in the interest rate on a mortgage, and can make a big difference.”
There are variations on credit scores. For example, the FICO Auto Score ranges from 250 to 900.
Payment history is the largest single factor affecting consumer credit scores. Consumers with near perfect credit are, perhaps counterintuitively, more severely impacted by a late or missed payment.
“There is an element of the bigger they are, the harder they fall. An otherwise excellent credit score could be dragged down by 100 points even if you’re just 30 days late one time,” Rossman said.
Another big influence on consumer FICO scores is credit utilization. It is recommended that consumers access no more than 30% of their credit limit at any given time, but Rossman said consumers with the best credit scores tend to keep their credit utilization at around 10%.
Credit reports don’t always reflect accounts that are paid off in full each month. Current balances are based on what those balances were listed at as of the payment due date, not necessarily a real-time balance.
Rossman suggests, if possible, making an additional payment each month to reflect low or zero due date balances, especially if the consumer will soon by applying for a large loan, such as a mortgage or auto payment.
