6 Reasons You Need to Improve Your Credit Score, Even if It’s Already Great

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You’ve put in the work to get your credit to a good place. You feel you shine in most of the five areas that make up a strong credit profile — you pay your bills on time, maintain a good debt-to-credit ratio, have a variety of credit accounts (and have had some of them for many years), and limit the number of credit inquiries on your account. But now that you’ve got that good credit score, it doesn’t mean you shouldn’t keep aiming higher.

“If you work to build a good credit score and then stop paying attention to it, your score can slip even if you aren’t doing anything ‘bad’ like missing payments or maxing out your credit cards,” according to an email from Thomas Nitzsche, the media relations manager for ClearPoint Credit Counseling Solutions.

Here are six reasons why you should keep improving your credit, even if it’s already quite good. (And you can keep an eye on how you’re doing by viewing two of your credit scores for free, updated every 14 days, on Credit.com.)

1. Gives You a Buffer

“The higher your score, the more buffer you have if something bad happens financially,” Nitzsche said. “For example, if your score is just barely ‘excellent’ and you miss a couple of payments you might drop down to a ‘fair’ score. Whereas, had you started with a near-perfect score, you may only drop down to a ‘good’ score.”

2. Puts You in a Better Position to Close a Credit Card (If Necessary)

You may be looking to close a credit card you don’t use, especially if it comes with an annual fee, but doing so could hurt your credit score (the amount of credit you have in relation to your debt, also known as credit utilization, makes up 30% of your credit scores).

“If you’ve been actively raising your already high score as you go along, even if your score drops following that card closing, your score will remain high enough to obtain new credit when you need it,” Barry Paperno, a credit expert who blogs at Speaking of Credit, said in an email.

3. Helps You Develop (& Maintain) Good Habits

Improving your score really is a lifestyle more than a one-time action,” and maintaining the good habits necessary for a high score can help you preserve your healthy credit profile for a long time, Nitzsche said.

4. Teaches Those Around You Good Habits, Too

Whether you’re setting an example for your kids or you’re helping your spouse better understand finances, having good habits of your own can really influence those around you.

“The ongoing work of maintaining a good credit score is also an important habit that your dependent or partner can learn from when you make it part of your routine,” Nitzsche said. “This can benefit others around you in the long term by having financial conversations and preparing them for a brighter financial future.”

5. You’ll Have Better Approval Odds

“Every creditor sets its own score requirements, so in most cases you have no way to know if your score will qualify for approval without actually applying,” Paperno said. “By ensuring your score is as high as it can be, such as by always paying on time, keeping card balances low and limiting new account applications, you can apply for credit when necessary without having to worry about whether you’ll be approved or denied.”

6. May Be Able to Help You Land Your Dream Job

Some employers look at a version of your credit report as part of the application process. So, just like you (hopefully) polish up your resume before applying for a job, having a shiny credit profile can be impressive.

“Although the credit score is not a consideration when being interviewed for a job, the factors that contribute to a healthy credit report can influence an employer’s hiring decision in some states where it is legal for them to include a credit review as a part of their hiring process,” Bruce McClary, vice president of public relations and communications for the National Foundation for Credit Counseling, said in an email.

Image: PeopleImages

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Is a ‘Perfect’ Credit Score Even Possible?

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If you were someone who wasn’t satisfied in school unless you had a report card filled with As, then maybe a blemish-free 850 credit score is your adulthood equivalent. You’ve heard it exists, but you’ve yet to see the perfect credit score yourself.

But that may be OK, as “there is absolutely no advantage to having [an] 850 versus any other 800 number (or even high 700, in most cases),” Thomas Nitzsche, media relations manager for ClearPoint Credit Counseling Solutions, said in an email.

Is Perfection Possible? 

While it may not be essential, the fact of the matter is, getting a perfect credit score isn’t easy. Credit scoring algorithms are complicated, and even if you do take a look at your credit and see a gold-star 850, it’s unlikely you’ll keep it forever.

“A perfect score is possible but very rare,” Nitzsche said.

And, really, once you have what is deemed “excellent credit” — typically seen as about 750 on a 300 to 850 scale, which most major credit scoring models follow — you’ll likely qualify for the best interest rates and credit products anyway. Whether you have a score of 780 or a perfect 850 won’t make much of a difference to anyone (except you, if perfection is your thing).

Good Habits That Lead to Excellent Credit

What we’re saying is that, yes, you can get perfect credit, but you don’t have to. However, working toward having great or excellent credit is certainly something to strive for. So, how do you do it?

“If you pay your bills on time, keep your balances low and apply for credit only as needed, over time you can build the credit scores you need to get the credit you want without unnecessary stress or frustration,” Rod Griffin, director of public education at credit bureau Experian, said in an email.

In addition to having a strong payment history, good debt usage (which experts say is at least 30%, and ideally 10%, of your combined credit limit) and few hard inquiries, it’s important to note that your age of credit and diversity of credit accounts are other factors impacting major scores. (To see where your credit currently stands, you can review your free credit report summary, updated each month, on Credit.com.)

And organized perfectionists rejoice — getting a good credit score is your time to shine.

“Those who set reminders, obsess over due dates and outstanding debt, notice when bills are missing, etc. have an advantage over those who are more impulsive,” Nitzsche said.

What to Avoid

Nitzche said it’s important to stay current on payments, as missing one can harm your score and keep (or significantly delay) you from achieving credit perfection.

“Payment histories remain on your credit report for 7 years, so missing just one payment can haunt you for a long time,” Nitzsche said.

He added, “Beyond this, the most common problems we see are folks not using credit at all (thus having low scores) and consumers who overextend themselves, using too much of their available credit.”

Griffin pointed out that you should avoid comparing your scores to other people’s, as that’s not what lenders are doing.

“It is possible for two people to have the same credit scores but for very different reasons,” Griffin said. “The only way to know what you need to do to maximize your credit score is to identify the specific items from your personal credit history that are most affecting your personal credit score.”

Now’s the Time to Start Building Good Credit 

So, whether you’re after that perfect 850 or just want a score that will help you get better terms and conditions on your lines of credit, it’s never too late to start.

“Don’t wait until you need good credit to start working on a great credit score,” Nitzsche said. “It may not feel like it right now, but you will likely have financial goals in the future that require a good credit score — or that will be easier if you have a great credit score.”

Image: PeopleImages

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