The relation between your credit card limits and credit score is actually more interdependent.  Your credit score utilization is found by dividing your current balances by your limits.  The lower the percent, the better for your credit score.  Individuals with excellent credit scores are found to be below 30%.

So a rise in your credit limit will cause your utilization to go down and could potentially improve your credit score.  A common method of making this happen would be to ask for your credit cards to increase your limits.  This is usually better than applying for new credit because it will lack the application process.

But we need to consider what is the hidden reason why you want an extension of your credit limits? This is the opposite scenario.  You are close to your limits or have a high utilization than you like and want to lower it.  A simple and quick way you think is to ask for your credit card limits to be increased.  This is scary in the prospect you need control not more credit that you can get your hands on.  Also, the success you will have with this strategy depends on your financial health, but you should assume the success rate to be low.

The idea comes back to if you don’t need to credit don’t apply for it.  The individuals that are good, excellent or even have a perfect credit score don’t ask for credit unless they need it.   They use what they have responsibly or not at all.

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A credit score is one of those things that the top number seems to never be achieved.  It is almost like the Japanese sword making.  Sword makers work their whole life refining their skills and will never admit they have make a perfect sword.  There is always room for improvement.

There is a point where a perfect credit score is just being above a certain level.  If you are above 800 that would be one case.  There is very little chance if you improve your score it will get you any real benefit.  You are unlikely to get a better rate of interest.  You have hit the bottom of the best interest rates.  Though it might be just be a matter of pride to have a perfect credit score.

Another reason besides pride and saving money, you could make yourself a little richer.  If you are at an 850 credit score you could win some money.  TrueCredit a few years ago ran a search for a person with an 850 credit score.  At the time they were paying a $1,000 reward and some other credit give aways.  It does say that some individuals have reached the perfect credit score level.  They called a “milestone.”  That could be an understatement.

There is little information to be found about what people have done to get a perfect credit score, but you should know that it is going to take dedication.  You will have to start with an excellent credit score and take to the extreme.  Also, if you do get there you should tell your story.  People will want to listen.

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1. Start Paying Your Bills on Time

The largest core area of your credit score is your payment history.  And not paying on time is going to kill it.  This is the number one best way to raise your credit score.  It does sound simple but individuals struggle with this piece every month.  It often has to do with the lack of a budget or lack of experience managing money.

2. Pay Down Your Debt

If you owe a lot, you need to develop a plan to pay down your debt.  This is the second biggest way to raise your credit score.  Your utilization is 30% of your credit score and being close to your limits will hurt it.  It also comes back to having a budget and developing a plan to use extra money to pay down debt.

3. Avoid Balance Transfers

Many individual use and advocate balance transfers as a way to get out of debt.  The truth is they often don’t work.  It has the effect of just moving the debt around.  Also, since your credit utilization is calculated on an account by account basis, you will can this to rise.  This will put you closer to your limits with that card and hurt your credit score.

4. Don’t Apply For Credit If You Don’t Need It

Don’t think you should apply for every credit card offer that comes to you.  Also, if a store offers you a 10% discount to apply for a store credit card, it isn’t worth it.  Each time you do this it creates a credit inquiries.  These have the ability to hurt or not hurt your credit score.  The idea is if you are applying for new credit all the time you represent a risk and will hurt your credit score.  You should only apply for credit as you need it.

5. Dispute Credit Report Errors

If you are looking of how to raise your credit score, you should start with disputing errors on your credit report.  You don’t think there are any errors.  Well, chances are you are wrong.  Studies have shown that 70% of credit reports have mistakes on them.  The only who is going to catch these most of time is you.  So check for and dispute errors.  This will help to raise your credit score.

6. Check Your Credit Report More Than Once Per Year

Now that you understand that errors are reported about you, you need to be looking for them.  You should look at your credit report a minimum of once per year, but if you really want to stay on top of it, twice would be better.  This prevents recently reported errors from staying on there if you dispute them.

There are even more than these and I will continue add more.  I hope that these are helpful

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The first and most recognized way your credit score is used is for lending.  Creditors want to review your credit report before lending you any money.  It is a clear indication of your credit worthiness and whether you pay your bills.  There are two other ways your credit report is used but are not often discussed or understood.

Employment

Employers can review your credit report as a form of a background check.  Your credit report gives employers an idea of who they are hiring.  There are no set guidelines that each employer has to follow in regards to what is disqualifies you from a job based on your credit report.  Often, the potential employer just has internal guidelines they follow.  The employer cannot perform a credit check without your permission and must provide you a copy of the report.

The popularity of this type of use of your credit report is done by a large portion of businesses today.  Is this a fair use?  This is a hugely debated topic.  The answer is yes in the eyes of Congress.  Who allow employers to do this under the Fair Credit Reporting Act.

Insurance

Another method of using your credit report is to aid insurance companies in assessing their potential exposure.  It is used by insurance companies to determine your insurability and used to set premiums.

The idea is people who are responsible with their credit are also responsible behind the wheel.  This is also a hotly debated use.  The two sides of the isle argue that there is or isn’t any  connection in your risk while driving based on your credit report.  No matter what you believe it happens.  And was OK’d by Congress also to in the Fair Credit Reporting Act.

Conclusion

The use of your credit report is something you need to recognize and understand.  It has the potential to effect your ability to get a job and get insurance.  These are two things you do not want to mess with.  This makes having a clean credit report one of the important things in your life.

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Chances are if you have a good credit score your utilization is pretty low.  Those with excellent credit score are usually around 10% to 15%.  This will more than likely leave you with thousands of available credit.  The thought of lowering limits has come across the mind of many people with the idea of, “I don’t need all this credit.”  Chances are they are right, but lowering limits can be damaging to a credit score.

If you do lower limits your utilization is going to go up.  This is the second largest part of your credit score and is calculated by dividing your balances by your credit limits.  So if you have less of a credit limit to divide by your utilization is going to up: hurting your credit score.

If want to lower limits to reduce your exposure to identity theft the better proactive would be to buy a credit monitoring program.  These watch your credit report for an changes and they even come with identity theft insurance. My recommendation is to get FICO® Quarterly Monitoring.  This is $50 a year and it comes with $25,000 in identity theft insurance and you get to review your credit report and credit score 4 times a year.  This is a steal compared to a 3 in 1 credit report.

So if you want to lower your limits this is OK.  There are times to lower limits like if you can’t control your spending.  You can also tell your credit card company to stop it.  The best thing you could do is to just leave them along and what your credit for any thefts.

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The biggest thing that people identify a good credit score will do is save money.  That is right, a lot of money.  Any break you get on a mortgage will truly add up to thousands over the life of the loan.  Also, better interest rates on auto loans and credit cards will add into that total.  There is no real way to estimate, but it will be in the tens of thousands.

This extra money does wonders for you as a person.  Since you are paying less each month on things like a mortgage and a credit card, you will have more money in your pocket.  This can saved to create an emergency fund or just to spend.

To truly grasp what a good credit score will do throughout your life, just consider the increase burden of a $100 more per month in rent or mortgage.  Also, $100 more a month in credit premiums and $50 more a month in an auto payment.  $250 might not seem like that much, but for some people, it is the difference between living within their means and struggling to get by every month.

Furthermore, having a good credit score protects you from the outside forces of the economy as well.  Today with a credit crisis, getting a loan is not as easy.  Standards have changed by lenders and only those of us that have a good credit score will get the loans.

An even worse case is the potential loss of a job which is the trend currently in the country.  A good credit score will create less monthly obligations in the form of lower payments.  This means you can live on less.  This also helps to buffer the effect of less money coming in and gives you more time to find a job or another solution.

Having a good credit score is a matter of pride.  You should feel good about having one.  This is one of the pieces of being financially fit and will reduce your overall worries.

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The first question is do you pay on time.  If you want an excellent credit score, you should never miss a payment.  Even one late payment can set you back and using budgets or online bill pay can be easy way to ensure you are on top of it.

How much do you owe?  Do you carry credit card balances month to month?  If so, what is your utilization on your revolving lines of credit.  You should try to keep this below 15%.

Limit the amounts of credit you have.  You should avoid every credit card offer you get in the mail or offered to you in a store.  You should stick to just a few credit cards and don’t consistently add to the list.  This will help you develop a stronger credit history in regards to your average age.  Also, this will limit your credit inquiries or applications for credit.

Use different types of credit.  An excellent credit score will use many different types of credit.  This is commonly referred to as a healthy mix.  Having a mortgage or some other installment loan will so you can manage different forms of credit not just credit cards.

If your goal is to have an excellent credit score, you need to be always on top of it.  This is just another thing in your busy life.  But if you don’t you are sacrificing thousands in saved money.  The answer for people really serious about getting an excellent credit score is to sign up for credit monitoring.

OK, it does cost money, but any improvement in your credit score will pay off ten fold.  If you are checking your credit score on a regular basis it is costing you money any ways.   Remember credit report is free but not a credit score.  So if you are going to spend  $30 to get your credit score, you should just sign up for FICO® Quarterly Monitoring.  This is $50 a year and you get 4 reviews of your credit score and your FICO credit score.

This is not a bad deal considering a 3 in 1 credit report with just one credit score costs $39.  The idea of credit monitoring is something that will help you sleep at night.  Getting something like this shows you want to have not just a good score but an excellent one.

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This can almost be too late.  For example if you have a credit report errors.  These are going to take at least 30 to 45 days to be disputed and possibly removed from your credit report.  If they are not removed, you then have to contact your account to dispute the item and hopefully have them remove it.  This will take even more time.

A more aggressive approach is to check you credit report every six months.  I know that you get just one free one per year, but shows your financial fitness.  You need to protect it.

If you just want to sleep at night not thinking about checking your credit report every 6 months you could sign up for a credit monitoring program.  They do cost money, but not as much as you think.  The best bang for your buck is the MyFICO quarterly monitoring.

So lets compare this to a 3in1 credit report that you would normally get which costs 39.95.  This is every single one you get costs this much.  With MyFICO quarterly monitoring it costs $49.95 per year.  That is just $10 more.  What you get will quarterly monitoring is a lot.  First, you get to review your credit report every quarter.  You will also get your FICO score every quarter.  Plus you will get $25,000 in identity theft insurance.

So if you are wanting to check your report twice a year you would spend around $80.  If you want to check your credit report and get your FICO score quarterly it cost $49.95.  Check it out for yourself: FICO® Quarterly Monitoring

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What is Considered an Excellent Credit Score?

As the current credit crunch has taken effect, the idea of not only what is a good credit score has changed, but so has an excellent one.  An excellent credit score is actually defined by the lender you are using.  For example, Eloan states an excellent credit score is one above 730.   MyFICO shows having a 760 or above will get you the best rate on a mortgage.

The best way to put it is the lender decides what the best interests are and the level of credit score you need to have to get them.

How Much Money will you Really Save?

That is a great question.  I think it is best to just look at the MyFICO website.  On their front page is a chart that shows how much money you will save on any combination of mortgage depending on your FICO score.  Comparing a good credit score to an excellent one one on a 30 year fixed $300,000 mortgage, the excellent score will save $14,400 over the life of the loan.

Not too much you think.  Well, consider this across all the loans in your life.  Include credit cards, auto loans and any other type of lending you do.  It really will add up.

Getting an Excellent Credit Score

If you are attempting to get an excellent credit score you will be at the top 10% to 15% of consumers.   The average American is somewhere around the 700 mark.  This isn’t bad but getting an excellent one will take effort.  This is a day to day practice.  Consider when you buy something at Target and the store offers you a store credit card for a 10% discount on your current purchase.  This 10% at the time would be great, but this is an hard inquiry on your credit report.  This can be the enemy of a excellent credit score.  They will prevent you from getting those few points you need to get there.

Also, carrying low balances is a day to day practices.  You need to make a conscience effect daily to control spending.  If you have even the idea that you can carry a large purchase for the next few months, you could slow your way to an excellent credit score.

People who have an excellent credit score know how it is calculated.  Furthermore, they consider thier actions and the effect it will have on thier credit worthiness.  Often the idea of having an excellent credit score is more rewarding then the 10% discount or the large purchase.

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Its use is wide spread, but the recognized use is in the application for credit.  The higher the number makes it more likely for an applicant to be approved for a mortgage, car loan, credit card or any number of different types of credit.

Other uses include insurance applications.  The insurance industry has found that clients with a lower credit score represent a higher risk and therefore must pay a higher premium.  Another use is by employers when doing background checks.  Companies want reliable and responsible employees and a credit check is a prefect way to get the picture about a prospective candidate.  Other uses can include applications for cable, cell phones, and store credit.

This makes your credit score one of the most important numbers in your life.  The better the credit score the more likely a person is to get a loan, credit card, mortgage, and car loan.  The loan will also be at a favorable interest rate, which will save lots of money in the long run.  Furthermore, the last reason a person want to not get a job is becuase of a low credit score.

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