An excellent credit score can be a huge value in your financial life. It's the determining factor in how much you'll pay for big loans like a mortgage or car loan, ensuring the lowest possible monthly payment. It also makes it easier to get a new credit card, and there are some great options for people with excellent credit.

If you've been stuck in the average-to-good range on your credit score and want to increase it so you can qualify for the best possible rates from lenders as well, there are some tips that will take your credit score to a new level. If you want an excellent credit score, defined by Experian as a FICO score above 800, you're going to have to do some work to get there.

A computer with a credit score graphic on it.

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Where do you currently stand?

Before you can boost your credit score to the 800+ range, you need to know where you currently stand. Any number of websites exist that provide your credit score, but it's important to note that not all of them provide a FICO score. FICO is the industry standard, and the one most financial institutions will use to determine your creditworthiness.

Fortunately, most credit card issuers are providing free FICO scores to cardholders. While lenders generally only provide a score from one bureau, this will be one of your best resources for determining your current score.

Another indispensable resource is annualcreditreport.com, which provides a free copy of your credit report from each of the three credit bureaus once a year. Grab your copies and check them for any inaccuracies. If something's wrong, like debts that don't belong to you, be sure to file a dispute with the credit bureau and inform them of the inaccuracy.

Understanding your credit score

The next thing you need to know before you get started is what factors go into your credit score.

  • Payment history: 35% of FICO score. Paying your bill on time every time is the most important factor in your credit score. If you have above-average credit, you probably already pay your bills on time.
  • Credit utilization: 30%. Credit utilization -- the ratio of your debts to available credit -- is another big factor. It's also one you have a bit more control to improve.
  • Length of credit history: 15%. This factor includes things like the age of your oldest account and the average age of all of your accounts. Unfortunately, the only thing you can do to improve this factor is wait.
  • Recent credit inquiries: 10%. Lenders don't like to see too many credit inquiries on your credit report. It makes you look desperate for a loan.
  • Credit mix: 10%. Lenders want to see that you can handle various types of loans like revolving credit and an auto loan.

Now that you know the main factors used to determine your credit score, you can see which areas you can improve. If you don't pay your bills on time every time, that's the first step you can take -- and it will have the biggest impact on your credit score. You need to show that you're paying your bills on time before you can even think about achieving an excellent credit score. If you need more in-depth strategies, read on.

Clever ways to improve your credit utilization ratio

In order to achieve an excellent credit score, your credit utilization ratio should be below 10%. The closer to 1% you can get it, the better. Interestingly, not using credit at all can actually hurt your credit score, as lenders like to see you can effectively use credit, not just have credit.

To manage your ratio, call up your credit card issuer and ask when it reports your balance to the credit bureaus. Then you can pay off most of your balance every month before that date, and leave a smaller amount for your automatic payment setup to handle each month. Alternatively, you can pay off big purchases as soon as they hit your card, but most prefer the simplicity of one manual payment a month.

Another way to improve your credit utilization ratio is to increase your credit limit. You can ask for a credit limit increase on your current credit card, but it may be more lucrative to apply for a new credit card and earn a sign-up bonus. The credit card company is likely going to have to check your credit either way; you might as well get a nice reward for it. Keep in mind, however, that credit inquiries count against your credit score and a new credit card will lower your average age of accounts, so if you're aiming to achieve an "excellent" rating within the next year, this option may not be for you.

Everything else takes time

While improving your credit utilization ratio is the fastest way to make an impact on your credit score, getting your score above 800 typically requires a long history. The recipe is simple: Pay your credit card bill on time for 10-plus years, then don't make any inquiries for new credit for a year and keep your credit utilization ratio low. That just takes a long time.

Fortunately, most people take a year or two to decide to make a big purchase like a new house -- and for larger purchases, an excellent credit score is actually useful. Consider the factors that go into your credit score as you're gearing up to make such a purchase, and apply for loans and manage them accordingly.

What to do with an excellent credit score

There's no use in achieving a top-tier credit score if you don't actually need it. If you've successfully gotten the best possible loan rate for your house or car, then there's not much need to worry about your credit score anymore (at least not for a long time). You should have no problems getting approved for nearly any credit card you want (assuming you meet any other qualifications for the card).

If you continue to stress out about how a certain financial move will affect your credit score, you won't see any benefits from improving it in the first place. That's why you should only really worry about reaching an excellent rating when you have a plan to take advantage of it.

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