What Is The Highest Credit Score Possible
When people are thinking about improving their credit rating they tend to ask what is the highest credit score you can get? The best answer to that question is one you may not like such as how long is a piece of string?
As with most things in the financial world anything that is really simple can be made complicated and this cannot be more relevant when it comes to credit scoring systems. Many people believe all banks use the same type of scoring system and credit score.
This not true because different banks and lenders can use a different scoring method based on their own lending criteria. Different systems are also used when evaluating potential borrowers for different financial products.
The Different Scoring Systems
The Fair Isaac Company or the FICO score is the most widely used system among the banks and financial lenders. This system uses a credit score scale from 300 to 850. Therefore, you can say that the highest possible credit score is 850. With a score of 850 you will be considered an excellent credit risk in the eyes of the banks, credit card providers and insurance companies. Although, any score above 700 is still considered a good score.
However, as pointed out earlier when it comes to finance nothing is that simple. The FICO score is not the only game in town as another system the banks use is the Vantage Score. This system was developed by the 3 major credit reporting agencies TransUnion, Equifax and Experian.
The key difference between the FICO and Vantage is the scoring range. Vantage has a scoring range between 501 and 990. Therefore, Vantages best credit score is 990.
You Can Have More Than One Score
The credit scores used between each of the 3 consumer credit reporting agencies can differ as well. They can calculate your score differently as the credit history information they collect can differ between each agency. For example, certain banks may evaluate your application for a credit card based on one bureaus score then, for a long term loan such as a mortgage they could base their decision on all three scores.
For insurance polices different scores can be used by companies to assess your suitability. Within the industry this is often referred to as the credit based insurance score. This scoring system can consider past claims and driving records to calculate your level of insurance risk.
Credit reporting has come into criticism recently as the scores that you can order directly from the agencies are different from the scores that are sold to banks and other financial institutions. In many cases the credit scores sold to consumers may only be estimated and illustrate a general picture of their credit worthiness.
The Highest Credit Score Possible Does Not Mean It's The Best
Credit scores are very important as they can influence the type of credit and loans you can obtain and how much you will charged for privilege. However, when it comes to credit scoring there is not just one score that can be said is the best.
For example, if you obtain one score from Experian and based on the FICO scoring model your score is a good one this does not guarantee that this will be the same score you will get with TransUnion or Equifax. It could be higher or it could be lower.
As banks and other creditors use different criteria to assess you for different financial products focusing on one credit score is not practical. You really need to look at all three. However, even though there are different scores the information the lenders use is similar. Therefore, in general terms what is considered a high risk for one lender is the same for another lender.
The key aim of credit scoring is for banks and lenders to determine how profitable you are as a potential customer and different banks want different types of customers. Therefore, if you've had your loan application rejected with one lender it does not mean you will be rejected with another. One banks rubbish is another banks gold.
Its all about the risk the banks are willing to undertake and the more profit they can make out of you. If you have a high credit score and you pay your outstanding balance in full each month certain banks may consider you a high risk.
That statement may same strange to you however you have to see it from the side of the lender. They are not going to make much profit on you compared to someone who has a habit of late payments or just pays off the minimum balance each month.
How To Get The Highest Credit Score Possible
Improving your credit score will make the process of borrowing easier and less expensive in the long term. With a higher credit score you will improve your chances of getting lower interest rates, insurance premiums and fewer lending restrictions.
Improving your credit score is not as difficult as you may think. If your score is 100 or 50 points out of the 700 range then check your credit reports to identity any areas that you can improve on. Maybe your debt to credit ratio is too high, maybe you are too close to your credit limit each month or you have too many revolving accounts. The key factor is paying off of your debts on time. If you can do that you will not have too much to worry about.
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