Credit Scores

A credit score is the greatest tool in determining the types of rates you will have to pay when borrowing money. Based on your credit score, you can ultimately save thousands of dollars on auto loan, mortgage and credit card rates. It is important to understand the importance of managing your FICO score responsibly and what steps are needed to protect the integrity of your rating. Although there are many things you may do that affects your score directly, not all of your actions will lower your credit limit.

Increasing Credit Limits

If you are interested in increasing your credit limit but are concerned the process may negatively impact your credit score, please note the opposite is true. According to the Fair Isaac Corporation, the developers of the FICO score:

"Credit checks made by businesses to offer you goods or services, or inquiries made by businesses with whom you already have a credit account do not count toward your FICO score. Credit checks by prospective employers also do not count. These types of inquiries may appear on your credit report, but they are not included in your FICO score."

No Impact on Credit Score

Since you are asking an existing credit card company to raise your limit, there should be no impact to your credit score. Additionally, when you successfully manage to raise your credit card limit, you may actually raise your credit score. Your credit utilization ratio, or the amount of money owed in relation to your total credit limit, accounts for 30% of your total FICO credit rating. If you raise your credit limits and do not increase your negative card balance by paying only part of your monthly bill or taking on new debt, you will have a greater proportion of credit to your existing debt. That improved balance ratio will be taken into consideration when recalculating your credit score.

There are types of inquires that will negatively impact your credit score, but the process of applying for an increase in your credit limit through a credit card company that you already have an established history with should not be one of them. To find out more tips about managing your credit wisely, visit the FICO's Credit Education Center.

You often hear about the importance of maintaining good credit so that negative information won't be reported to the three credit bureaus, but what are they and how do they affect you? They are major players in the credit world and have a huge affect on your everyday life, which is why it's important to understand the role of the credit bureaus. You definitely don't want a lack of knowledge to have a negative effect on your day-to-day life.

Lets take a deeper dive into what the credit bureaus are and how they affect you...

What They Are?:

There are three major credit bureaus, also known as credit reporting agencies, in the United States; they are Experian, Equifax, and TransUnion. While they offer many services to the public and companies that seek consumer information, they are mostly important to you because they collect all of your credit information (who you have credit accounts with, how you manage payments,howlong your accounts have been open,whether you have defaulted, etc.) and compile it into reports consistently. While they help you by allowing you to see what's on your report (once a year for free and for a fee afterward), their main business is providing consumer credit information to banks, credit card companies, employers, prospective landlords, lenders and more.

The Credit Score

While the information in your credit report is extremely important to those requesting information, the credit score is even more important. The one important credit score that most lenders use to determine whether they will lend you money or credit is the FICO score. The FICO score is developed by the Fair Issac Corporation and takes data from the 3 credit bureaus to determine your credit score. By taking the information in your credit report, they determine a credit rating to help lenders quickly judge whether you're a credit risk. FICO scores generally range from 350 to 850; and if your score is lower than 620, you are typically thought of as a bad risk - which will make it difficult for you when you are trying to get a loan or credit card approval.

There is no favoritism when it comes to a consumer's credit report - as all data collected by the Credit bureaus are based on your consumer habits; for example, paying your bills on a timely manner, paying off debt quickly, and the balance amount of your debt. So their job is to compile information and report it. If at any time you look in your report and find that there are errors - you need to notify them. The credit bureaus will then investigate it and attempt to help you correct it. So it's a good idea to utilize the credit bureaus to your advantage by keeping up with your reports and scores to make sure all is accurate. This way, you can at least know that the information being reported won't work against you.

If you're curious to know what your FICO score is get a free credit report at Go Free Credit.

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