topic Re: What score is "enough"? in Understanding FICO® Scoring

What score is "enough"?

Anonymous — Sun, 20 Jan 2019 13:33:19 GMT

What score is basically the lowest that gives you ALL the benefits? For instance, can you get a different interest rate on a mortgage if one person's score is 810 and one is 850 (or are these essentially considered the same)? Another way of putting it, is there a score that doesn't really have a benefit going over (other than bragging rights and pride...not to minimize those things). I'm sure one answer is that it depends on the person and what they want...but that isn't the answer/question I am posing here.

What I am posing is, is there a score that going over doesn't have any extra benefit (maybe there isn't one...and an 850 will get a person approved for a certain high value business loan that an 849 wouldn't work for...I'm not sure)?

For instance, if my score was 780 (it isn't, but hopefully will be this year) would there be any tangible incentive of trying to increase it?

Thanks.

Re: What score is "enough"?

Anonymous — Sun, 20 Jan 2019 13:44:38 GMT

I have heard that 760 seems to be that magic number and I’ve heard that 740 is the magic number.

Like all things, it seems to be attached to your individual profile.

Re: What score is "enough"?

Anonymous — Sun, 20 Jan 2019 13:50:36 GMT

Thanks!

Re: What score is "enough"?

Anonymous — Sun, 20 Jan 2019 13:59:54 GMT

760 IMO. When you can get approved for the lowest rates possible, I would say you've accomplished what you needed to. If 760 qualifies you for the best APRs, the people with higher credit scores still get the same rate. Tangible benefit for myself to get to 850....nope.

Re: What score is "enough"?

Anonymous — Sun, 20 Jan 2019 14:13:35 GMT

Wow, that's a great question! And I think the answer has to be 850.

Sure, in any normal situation 849 is going to be essentially the same as 850 and so far above what you need that it doesn't make any difference. But I can think of a couple of scenerios where it could make a difference.

First, you're competing against other applicants for a loan. Or it could be prestigious card, or a membership in a club, or a job (a lot of different kinds of applications consider credit scores.) It may not be a direct competition, but banks only have so much money to lend, and for various reasons institutions limit the number of cards, memberships, and (obviously) jobs they offer. It seems unlikely that it's going to come down to one point of credit score, but, at least in theory, it could make a difference and 850 is better than 849.

It's like an SAT score for a university applicant. If you want to go to most state schools, the difference between 1590 and 1600 is nothing. Either one is far more than you need. But if you're competing for a scholarship at an elite school, 1600 might be necessary.

Second, if you're applying for something elite, there are going to be human eyes looking at your scores. We're not talking about a simple credit card application that a computer evaluates and spits out an answer. When a human looks at 849, it's 849. That's your score. But when you see 850 you know it's capped. It's not necessarily only just one point better than 849. It might really be 900 if the scale went that high. In other words, when you hit 850, the impression is that you're basically "off the scale," which (at least when a human is evaluating it) could make a big difference. In fact, in this sense, the difference between 849 and 850 may be the single biggest advantage a one-point gain can get you (although in reality, there are other thresholds that are far more important for most of us). And again, this is only going to figure in for elite applications.

Re: What score is "enough"?

SouthJamaica — Sun, 20 Jan 2019 15:48:06 GMT

@Anonymous wrote:
What score is basically the lowest that gives you ALL the benefits? For instance, can you get a different interest rate on a mortgage if one person's score is 810 and one is 850 (or are these essentially considered the same)? Another way of putting it, is there a score that doesn't really have a benefit going over (other than bragging rights and pride...not to minimize those things). I'm sure one answer is that it depends on the person and what they want...but that isn't the answer/question I am posing here.

What I am posing is, is there a score that going over doesn't have any extra benefit (maybe there isn't one...and an 850 will get a person approved for a certain high value business loan that an 849 wouldn't work for...I'm not sure)?

For instance, if my score was 780 (it isn't, but hopefully will be this year) would there be any tangible incentive of trying to increase it?

Thanks.

IMHO there is no such sweet spot, for several reasons.

(a) There are multiple FICO scoring models, each of which behaves differently, sometimes wildly differently.

(b) The scores are just an algorithm applied to the data. Sometimes the score is "good enough" but the data which kept it from being a perfect score is what kills you. E.g., I was turned down by a credit union for a credit card when the FICO score they pulled was 827, for the reason that I had too many new accounts and inquiries. Yes by all accounts an 827 is "good enough" but it would have been 850 except for my new accounts and inquiries. So the fact that it wasn't a perfect score could be a tip off that the reasons it's not a perfect score are what will come up and bite me.

So I agree with @Anonymous that it's a worthwhile endeavor, and not a wasted endeavor, to strive for perfection.

Re: What score is "enough"?

Anonymous — Sun, 20 Jan 2019 16:49:38 GMT

Having an 850 may take away the codes associated with why your score isn't perfect but simply having an 850 does not guarantee an approval. An example would be FICO doesn't consider income. A person with an 850 can still be denied credit.

Many lenders have their own internal scoring also. Let's say you have a habit of making payments that are 3 days late each month. As far as FICO is concerned you will remain perfect. The creditor's internal model may have dropped you to the point where you won't be approved for anything else but FICO says your score is 850.

For the best rates, I do believe that 760 and above will get you the best APRs. I don't like to use the words "always" and "never". They will get you into trouble. So even though I can be perfect on a scoring model, I don't believe there really is a perfect score. I believe that 760 is good enough.

Re: What score is "enough"?

Gmood1 — Sun, 20 Jan 2019 16:56:39 GMT

Only to make yourself feel good. Once you've hit 740, depending on the scoring model. There is no benefit besides stroking ones ego.

The score still doesn't guarantee an approval. That's dependent on the file associated with the score.
There aren't any elite loans out there designed for 850.
Lenders want to make money off the loans. There's no benefit for them to give you a lower rate than someone with a 780.

Re: What score is "enough"?

Thomas_Thumb — Sun, 20 Jan 2019 17:17:14 GMT

There is no magic number but, I get bummed when my EQ mortgage score dips below 800 .

Re: What score is "enough"?

Anonymous — Sun, 20 Jan 2019 17:29:23 GMT

@Gmood1 wrote:
Only to make yourself feel good. Once you've hit 740, depending on the scoring model. There is no benefit besides stroking ones ego.

The score still doesn't guarantee an approval. That's dependent on the file associated with the score.
There aren't any elite loans out there designed for 850.
Lenders want to make money off the loans. There's no benefit for them to give you a lower rate than someone with a 780.

This. And we have seen this in action on this very forum where someone with a much lower score and lower income than someone with 800s got a higher limit.

This happens with Disco and NFCU for example where someone with a 700 and lower income ends up with a better outcome than the person at 800 because they’re more likely to be profitable based on the algorithms those two lenders use.

So really it comes down to what’s good enough for the best rates and that is widely regarded as 760 but there are no guarantees with anything, even rates, based on score alone.

Re: What score is "enough"?

pinkandgrey — Sun, 20 Jan 2019 20:58:41 GMT

Honestly, there is no magic number. There are people with 850 scores that still get denied for things. Way more factors come into play than just that one number. That being said, being in the high 700s to 800s will always be a boon lol

Re: What score is "enough"?

ridgebackpilot — Sun, 20 Jan 2019 22:12:08 GMT

I agree with two important points made here:

Scores in the mid-700s are high enough to qualify for the most attractive credit offerings available, including the best credit cards, 0% financing, etc. Anything more is icing on the cake!
In making their decisions, most lenders look well beyond credit scoring to other factors such as income, DTI, home ownership (stability), your banking relationship with them, etc.

Credit scores are like academic testing scores: Universities, medical schools, and law schools look far beyond SAT, GRE, MCAT, and LSAT scores when evaluating candidates for admission. A perfect test score but a boring résumé is no guarantee of admission to your first choice of schools!

Re: What score is "enough"?

Anonymous — Sun, 20 Jan 2019 22:22:00 GMT

@Thomas_Thumb wrote:
There is no magic number but, I get bummed when my EQ mortgage score dips below 800 .

Asked FNBO for a credit limit increase on my card with a score in the 800s and they said "NO". Now if that doesn't just make you wonder? As others have posted the high scores do not guarantee approval.

Re: What score is "enough"?

ridgebackpilot — Mon, 21 Jan 2019 02:10:31 GMT

@Anonymous wrote:
Asked FNBO for a credit limit increase on my card with a score in the 800s and they said "NO". Now if that doesn't just make you wonder? As others have posted the high scores do not guarantee approval.

Great example. FNBO is paranoid about inquiries; credit score is nearly irrelevant.

I think of my score as a ticket for admission. Unless a lender (like FNBO) is hung up on other things, your score gets you in the door. But lenders take your entire file into account when making decisions on extending significant credit.

Re: What score is "enough"?

Anonymous — Mon, 21 Jan 2019 03:26:11 GMT

@Anonymous wrote:
Asked FNBO for a credit limit increase on my card with a score in the 800s and they said "NO". Now if that doesn't just make you wonder? As others have posted the high scores do not guarantee approval.

Credit scores IMO aren't in the top 3 or maybe not even the top 5 in the list of factors considered by a lender for a CLI.

Re: What score is "enough"?

NRB525 — Mon, 21 Jan 2019 17:22:15 GMT

There will be a threshold, in any given bank for whatever score model they use, above which no applicant will get a better rate on that loan product. This is because of the way FICO scores are designed.

A FICO score measures risk of default given the persons current debt structure and payment habits. That is not an application for credit, which is why optimizing score without a planned app is so much navel gazing. Maximizing score requires no new borrowing, lots of on time payment history, and low debt amounts.

Once you approach a bank about an application for credit, whether a CC, LOC or Mortgage, that new debt balance will cause your score to go down, because you have now taken on a new risk factor, a new risk of default. The bank doesn’t care if you have 850 vs 800 (picking a number) because that new loan is going to take away (lower) that 850 score.

Re: What score is "enough"?

Thomas_Thumb — Mon, 21 Jan 2019 21:29:47 GMT

It is possible to open a new account (specifically a CC or a LOC) without score dropping below 850.

In certain situations opening a new account (SSL if no open installment loans) or (CC if no revolvers in file) may boost a Fico 8 score by 30 points. Key point is to report a low B/L ratio for the new SSL or low utilization for the new revolving account.

Re: What score is "enough"?

Anonymous — Tue, 22 Jan 2019 00:24:13 GMT

At my local credit union, 740 is enough for the best rate on an auto loan. I found this out while applying for a credit card in person when they told me my FICO 8 score was 728, or 'just shy of a Tier 1 rate'. Some people I work with also told me the same number is good enough at their credit union as well.

So, I'd say a 'good enough' number is whatever the lender you are looking at doing business with tells you, plus some extra room to account for any possible negative score changes from a new HP and new account.

Re: What score is "enough"?

NRB525 — Tue, 22 Jan 2019 03:28:56 GMT

@Thomas_Thumb wrote:
It is possible to open a new account (specifically a CC or a LOC) without score dropping below 850.

In certain situations opening a new account (SSL if no open installment loans) or (CC if no revolvers in file) may boost a Fico 8 score by 30 points. Key point is to report a low B/L ratio for the new SSL or low utilization for the new revolving account.

Yes, that is true, but not really borrowing anything where the rate you pay matters.

Taking out a new mortgage gage usually sits at 100% utilization for quite a while. That’s where interest rate matters, not with my pretend SSL at $500.

Re: What score is "enough"?

EW800 — Tue, 22 Jan 2019 03:33:31 GMT

@Thomas_Thumb wrote:
There is no magic number but, I get bummed when my EQ mortgage score dips below 800 .

That is a personal goal of mine as well -- keep all mortage scores north of 800.

I currently have two of them in that range, with hopefuly the third (EQ) there in a coule of weeks.