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Welcome To The Insighter!

Explore the latest happenings at Kirtland CU and learn about important topics from around the financial world. Here’s your insight! To learn about retirements, investments and financial planning, check out Invested now.

Six Ways to Improve Your Credit Score

By K-Staff

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Building and maintaining a solid credit score opens the door to the best interest rates when you need to borrow money.

How much of a difference can a credit score make? The difference can be dramatic, especially for major purchases like a home or car. For example, buying a home with fair (versus excellent) credit may result in a higher interest rate – meaning higher monthly payments and overall cost. Even one extra point of interest on a typical mortgage could cost $150,000 over the life of a 30-year loan.

To build and maintain your score, consider these tips:

Pay bills on time

Consistent, timely payments are the most important factor when calculating your credit score. And loan and credit card payments are just part of the picture – your payment history for telephone, cable, gas, electric, and other bills can also impact your score.

If you’re confident you’ll have the money in your checking account when your bills are due, one strategy to avoid late payments is to pay them automatically via bank draft. This approach is convenient and great for bills that are similar from month to month (like student loans, mortgages, utility bills, and car payments).

For credit card bills, which could vary significantly based on your spending, another option is to set up automatic minimum payments. Paying the minimum avoids the possibility of a late fee, even if you don’t have enough money to pay the entire bill when it’s due. Just remember to pay the remainder of the balance manually, perhaps with the help of a recurring reminder in your calendar.

Avoid high credit utilization

The credit utilization ratio is the percentage of a credit line that’s in use. For example, if your credit card has a $10,000 limit and the balance is $5,000, your credit utilization ratio is 50%.

Maintaining a low credit utilization ratio is key for a good credit score. Experts recommend keeping your credit utilization below 30% across all your credit cards and lines of credit. If your utilization ratio is high, pay down balances as soon as possible.

On the other hand, if you consistently pay your credit card bill in full and are confident that you’re managing credit responsibly, requesting a credit limit increase can help lower your credit utilization ratio, potentially improving your credit score.

Limit hard credit inquiries

A hard credit inquiry occurs when an organization reviews your credit report as part of its decision-making process. These inquiries can slightly reduce your credit score for a short period, typically a few points, and can remain on your credit report for two years.

Hard credit inquiries can be triggered by:

  • Applying for a Credit Card
  • Mortgage Applications
  • Auto Loan Applications
  • Personal Loan Applications
  • Student Loan Applications
  • Renting a Home or Apartment
  • Setting up Utilities
  • Applying for a Business Loan
  • New Cell Phone Contracts
  • Applying for Home Equity Loans and Lines of Credit


It’s essential to be aware of actions that can lead to hard inquiries, especially if you plan to make a significant financial move soon, like buying a home.

Multiple hard inquiries in a short time can lower your score, so only apply for credit when you genuinely need it. But in certain situations, like looking for a new car, mortgage, or utility provider, getting quotes from multiple lenders is smart. The good news is that most credit scoring models count all of those inquiries as just one inquiry for a set period of time – usually 14 to 45 days. So don’t hesitate to shop around within a defined window when seeking a major new financial commitment.

Think twice about cancelling credit cards

A popular way to simplify your financial life is to limit yourself to one credit card. After all, multiple cards mean more bills to manage (so it could be easier to miss a payment), and numerous cards may make it easier to use more credit than planned. 

When reducing the number of credit cards you actively use, it’s tempting to officially cancel the unused accounts. But doing so could potentially lower your credit score. That’s because an important component of your credit score is tied to the length of your credit. In many cases, the best way to “cancel” a card is to pay off the outstanding balance and use it only for emergencies.

Monitor your credit report

Knowing what’s on your credit report is vital for spotting inaccurate information and unauthorized use of your identity to obtain credit. You can get free access to your Experian, Equifax, and TransUnion reports once per year at AnnualCreditReport.com.

Suppose you’ve been denied credit based on information in your credit report. In that case, the lender is required under the Fair Credit Reporting Act to provide you with the name of the credit reporting agency and how to get a free report.

If you find inaccurate information on your credit report or suspect identity theft, contact the credit bureau right away.

You can now also monitor your credit score and information through SaavyMoney in Kirtland CU Digital Banking – it’s FREE, easy to set up, and helps you stay aware of your credit situation more easily than ever before!

Can't pay? Be proactive

Financial hardships can happen to anyone. Contact the lender immediately if you have an emergency and can’t pay a bill. There are no guarantees, but many lenders and utility companies are willing to work with borrowers during tough times, especially if you reach out proactively.

Before you call, have a clear summary of why you can’t pay and what you’d like the creditor to do to help. For example, if you can’t afford a $100 minimum payment, perhaps you could afford a $40 minimum payment.

If you’re experiencing an ongoing financial hardship, seeking financial counseling from a reputable nonprofit organization can help you to avoid lasting damage to your credit.

For more articles like these, as well as tools, calculators, and other useful information around financial wellness, visit our Financial Wellness Center and MoneyEdu today!

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