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 real truth is this is just a general rating.  The person who really determines if you have a good credit score will be the lender.  Keep in mind, that each lender has their own guidelines they follow.  So if you have a credit score of 700,  lender A will give you a nice interest rate, but lender B might not give as attractive of a rate.  It truly is in the eye of the lender.

Another consideration is the credit crisis the country seems to currently be in.  This has made it increasingly hard to get credit.  Furthermore, creditors have start to reconsider their lending guidelines making a higher score needed to get a loan.

The rule you should follow is the higher the better.  Any credit score at or above 700 is a good credit score.  You are better than average and should not have a hard time getting approved for a loan.

How to get a good credit score

To start on a path to a good credit score, you need to know several things.

First, how is a credit score calculated.  It is a complex formula that takes several factors into account that are found on your credit report.  Here is the list along with their weight:

1. Payment History 35%
2. How Much You Owe 30%
3. Your Credit History 15%
4. Applications for Credit 10%
5. Your Credit Mix 10%

The next part is to get a copy of all your credit reports and credit score.  You want to either get a 3 in 1 credit report with a credit score or check out MyFICO to get your Fico Scores/Reports.  You want all three because there are things that could be on one report but not another.  Also, you want your credit score to see where you are starting and to set a goal for yourself.  This is a must if you want to get a good credit score.  These are not free but they are worth it considering how much money you could save by you having a good credit score.

Now that you have you credit reports, the next step is to review your credit reports and check for any mistakes.  You need to dispute credit report errors.  Around 70% of credit reports have errors on them and your credit reports more than likely have some.  This could be one the easiest and most forgotten about ways to improve your credit score.

Next is to use what you learned about what goes into your credit score to push your score higher.  One the biggest is to just pay your bills on time.  This has the largest effect on your score and late payments will only drag you down.  Other things like: paying down your debt, don’t apply for new credit on a regular basis, and use many different types of credit will also lead you in the right direct.

The truth is you should be trying to get not only a good credit score but an excellent one.  These are scores above 750 and really have huge benefits through out your life.  Check out how to get a excellent credit score.

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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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