Money Management

An 850 is the highest possible score with many credit scoring systems. Discover how many Americans have reached this mark and how to improve your credit. 

Your credit score ranges from 300 to 850. There are technically many types of credit scores, and not all of them use this scale, but the most popular ones do. That includes the FICO® Score system, which is what’s most widely used by lenders.

Since higher scores are better, an 850 is a perfect score. It’s also notoriously difficult to reach. While improving your credit score isn’t too difficult, getting the highest possible score is. It takes many years and quite a bit of work managing your credit.

So, just how rare is it to have a perfect credit score? A credit score study by The Motley Fool Ascent has the answer. After we look at that, we’ll also cover why perfection isn’t necessary when it comes to your credit score.

How many Americans have an 850 credit score?

Only 1.31% of Americans with a FICO® Score have a perfect 850 credit score. While a score this high is rare among any demographic, older generations are more likely to have perfect credit. Baby boomers make up a whopping 59.4% of the people with an 850 credit score. Millennials, on the other hand, make up just 4.1%, and Generation Z a mere 0.1%.

In terms of actual numbers, there were 258 million credit-eligible people as of the 2020 U.S. Census. However, some adults don’t have enough data on their credit history for FICO to be able to calculate a score for them. They’re considered “credit invisible.”

FICO data scientists have estimated that 232 million U.S. consumers could be scored under the FICO® Score system. Based on that number, about 3.04 million Americans would have an 850 credit score.

Nobody needs perfect credit

The financial benefits of perfect credit are the same as having very good credit. The only special thing about perfect credit is bragging rights — but showing off an 850 probably isn’t going to make you the life of the party.

In terms of how high your credit score needs to be, a FICO® Score of at least 760 is fine. At that point, your score is high enough to pass any credit check, qualify for any financial product, and get the lowest rates on loans. You’ll likely be able to qualify for all these:

Best credit cardsLow-interest mortgagesLow-interest personal loans

To be clear, no credit score guarantees you’ll be approved for whatever you want. You can still get denied for a credit card or mortgage with a 760 credit score, or an 850. Lenders look at much more than just your credit score. But once you have a FICO® Score of 760, your credit won’t hold you back from anything.

To sum it up, an 850 credit score is a lot of work for no real reward. A high credit score is beneficial, but an 850 isn’t necessary.

How to improve your credit score

If it’s not where you want it to be yet, here are a few tips that will help you raise your credit score:

Have at least one credit card you use regularly. To build credit, you need to borrow money and pay it back. A credit card is one of the best ways to do this. If you pay your full balance every month, you don’t get charged credit card interest.Always pay your bills by the due date. Your payment history is the most significant factor in your credit score. A late payment (meaning one that’s past due by 30 days or more) on a credit card or loan can severely damage your credit.Keep your balance below 30% of your credit limit. For example, if your card has a limit of $10,000, aim to always have the balance below $3,000. Another important part of your credit score is your credit utilization ratio, and using too much of your credit can cause issues.Be selective when applying for new credit cards and loans. Opening new accounts and applying for new credit cards can lower your credit score. When you’re trying to improve your credit, it’s best to keep these to a minimum.

Some people think building credit is complicated, but it’s really not. If you follow those habits, you can make fast progress with your credit score.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

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Automating my investing and making sure money transfers to my brokerage account regularly made a huge difference in my account balance. Read on to learn why. 

My brokerage account balance has been growing really nicely over the past decade. I have my money invested in pretty safe investments, with most of my funds in S&P 500 index funds or other index funds that track the performance of the stock market as a whole or specific sectors of it.

While I’ve spent a little bit of time researching my investment options and picking assets to buy, the thing that has actually made the biggest difference in growing the size of my account balance is not a particular investment. Instead, here’s what has helped my account grow.

My brokerage account balance has grown because of this one money move

The biggest contributing factor to my growing balance is the fact that I have set up automatic transfers of money into my accounts.

Basically, my payments from the company I work for are deposited into my account on a set day. As soon as that money comes in, a portion of it goes out again. I don’t get to spend it, it just passes quickly through my bank account and goes directly into the account at my brokerage firm.

This has been set up for a long time, and the only change I have ever made is to increase the amount of money I have deposited to my investment account as my income has grown to ensure that I’m still investing around 15% of my earnings.

Once the money goes into my brokerage account, I use dollar-cost averaging to buy a set amount of the same S&P 500 index fund each and every month. I don’t worry about trying to time the market, or about how many shares that amount of money is buying for me. Each and every month, the same process happens with the same assets being purchased for the amount of money I transferred over.

Why automatic transfers to an investment account can make such a big impact

Setting up transfers from my checking account has made a huge difference in how big my brokerage account balance is because it ensures that investing is automatic and effortless.

My default position is to invest. I don’t have to think about how much I want to put into my account each month since I already did that calculation a long time ago. I don’t have to decide how much I can spend in order to invest enough — I just know I can spend what is left over after my investments are made.

And, as my money is invested every single month, my brokerage account balance grows and grows — not just because of those deposits, but because those deposits then earn more returns for me and my balance keeps getting bigger.

Automating investments to ensure you are consistently putting money in the market can be more important than just about any other financial move you make. It ensures your money is always going to be working for you, helping to set you up for a secure future. Give it a try for yourself and you’ll soon see your account balance growing too.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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You can find investing advice anywhere. But is it a good idea to take it from social media influencers? Read on to find out. 

Social media has become a part of our daily routine. From keeping up with loved ones to starting new friendships, social media has become a hub of social interactions. While it is commonplace to use social media to keep up with the Joneses, it might be concerning to think about someone making an investment decision based on social media advice.

According to the 2023 Charles Schwab Modern Wealth Survey, more than half of Generation Z members are doing just that. They are not only following influencers for fashion advice, but also turning to them for advice on investments. This raises the question: Should you allow social media to influence your investment decisions?

A majority of Gen Zers use social media for financial advice

According to the survey, nearly 60% of Gen Zers follow influencers on social media who provide financial advice. Additionally, 53% of respondents acknowledged that their perception of wealth is influenced by the content they encounter on social platforms.

Moreover, over 50% of this generation’s members make purchasing decisions based on what their friends and influencers showcase on social media, while an equivalent proportion also base their investment choices on the same content.

This data highlights the considerable impact that social media has on the financial decision-making process of Gen Zers, emphasizing the importance of having responsible content on social media.

Pros of using social media for investing decisions

If you are an avid social media user, it is only natural to check out some influencers for guidance on investment decisions. Some influencers provide valuable insights, share trading and investment tips, and even analysis of some specific stocks.

Many influencers are able to make investment topics easier to understand. Influencers are able to educate and entertain at the same time. Social media can be a great way to learn about new investment opportunities.

By following influencers who are knowledgeable in the finance industry, you can stay informed about new trends and opportunities that you might not have known about otherwise. The biggest benefit is that social media has made finance topics more accessible to the general public.

Cons of using social media for investing decisions

However, the validity of the data and information shared by these influencers may not always be dependable. Many of these influencers do not have any professional training or expertise in the field of finance, so they may not be the most reliable sources of advice.

What’s more, some of these influencers may have a hidden agenda, and they may not always have the best interests of their followers in mind. It’s important to differentiate between legitimate financial advice and paid promotions.

Many influencers who share financial advice on social media are being paid by companies to promote their products. These paid promotions might not necessarily be the best financial decision for you.

Additionally, social media influencers often have a different lifestyle and income level compared to the average person. They might be successful business owners or celebrities with millions of dollars in their bank accounts. This means their financial advice might not be applicable to your personal situation.

Tips for using social media for investing decisions

If you do decide to use social media for investment decisions, you need to be extra cautious. Set up filters, choose the right sources of information, and do thorough research before making any investment decisions.

It would help if you also used credible financial sites to cross-check this information. If you are not careful, you could land in hot water — financially speaking. It’s essential to take any advice with a grain of salt and make informed decisions that align with your own financial situation.

Social media has become an integral part of our daily lives, including our financial decisions. While over 50% of Gen Zers make investment decisions based on social media, it’s important to consider the credibility of the advice provided. However, social media can also provide valuable information and education about new investment opportunities. It’s essential to have other sources of information and to do your research as well. By taking a more thorough approach to vetting investment advice, you will be empowered to make the best financial decisions for you.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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If you withdraw money from a CD before the term ends, you will pay a penalty. But, if rates have gone up a lot, it may be worth paying that cost. Find out more. 

A certificate of deposit is a kind of investment that allows you a guaranteed rate of return in exchange for keeping your money invested for a period of time. You’ll make a lump sum investment and will be offered a higher interest rate than the typical savings account. But, there’s a catch. You will not be able to withdraw your money for a designated time period. If you access your funds, you’ll be charged a penalty.

Because of the fees associated with breaking a CD early, it’s typically a good idea to try to avoid doing that. But that’s not always the case. There are times when it could make sense to get your money out ahead of schedule, even if that means you have to pay added costs and lose some promised returns.

When might breaking a CD make sense?

Breaking a CD early can make sense in some situations. For example, you may want to withdraw your money if interest rates have increased significantly and you can actually make more by paying the penalty for early termination of your current CD and investing the funds you get back in a different one that pays a much higher yield.

Say, for example, you had a CD paying you a 1% annual percentage yield with a five-year term, you invested $10,000 in it, and you had a year left on your investment. But, interest rates have now gone up dramatically and you could buy a CD with a 4% APY and a five-year term.

If your penalty is a year of simple interest, you’d incur a $100 fee and lose around another $100 because you won’t get paid interest over that last year. If you withdrew the money, you’d walk away with about $10,310 in total (less than the $10,510 that you’d have ended up with if you left the CD alone).

Once you invest that money in that new CD paying 4%, though, you’d walk away with about $12,540 at the end of that new five-year term — making around $2,230 in interest over that time period. Losing $200 in order to make $2,230 is well worth it as long as you plan to leave your money invested in CDs anyway.

You may also want to break a CD early if you have a dire need for the money and don’t want to end up in debt. If you have a choice between paying credit card interest at 20% or worse, or payday loan interest at upwards of 400% APY, breaking the CD is usually the better move.

How to decide whether to break a CD

Ultimately, the best way to decide whether to break a CD is to look at what you’d lose by doing so and compare it to the money you could make if you emptied the account and put the money into a new one instead.

If you find that the interest on the new CD minus the losses from breaking the CD early is a positive number, you’d end up better off with early termination.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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