National Credit Education Month

March is National Credit Education Month, a time dedicated to helping individuals better understand what credit is and how it impacts their financial lives. Credit plays a major role in many important milestones, including buying a home, financing a vehicle, or applying for credit cards. Taking time to learn how credit works can make a meaningful difference in your financial future. 

Why Your Credit Score Matters 

USA.gov defines your credit score as “a number that creditors use to determine your credit behavior, including how likely you are to make payments on a loan.” Most credit scores fall within a range of 300 to 850. It varies from institution to institution, but in general, a score in the 700s or higher is considered good, while scores above 800 are considered excellent. The higher your score, the more trustworthy you appear to lenders. 

A strong credit score can help you qualify for loans, credit cards, and better interest rates. It may also impact your ability to finance a home or vehicle, secure rental housing, or even obtain certain utilities and services. On the other hand, a lower score can limit your options or lead to higher borrowing costs. 

Erica Casey, our Director of Mortgage Lending, stressed the importance of credit scores in major life decisions, explaining, “Credit scores are an important factor when purchasing a home. They can impact both the interest rate you receive, and the loan programs you may qualify for. Your credit score provides lenders with a snapshot of your repayment history and helps them assess the level of risk associated with lending to you. Borrowers considered higher risk may be required to provide a larger down payment, maintain additional reserves (money in the bank), or go through more extensive underwriting.” 

Understanding and managing your credit is one of the most important steps you can take toward long-term financial stability.  

Tips for Improving and Maintaining Good Credit 

If you're looking to strengthen your credit score, a few consistent habits can make a big difference over time: 

1. Pay all bills on time – Your payment history is the largest factor affecting your credit score. Even one late payment can negatively impact your score, so making on-time payments is essential. 

2. Keep credit card balances low – Using a smaller portion of your available credit (ideally under 30% of your credit limit) demonstrates responsible borrowing and helps protect your score. 

3. Avoid opening too many new accounts at once – Applying for several credit accounts in a short period of time can create multiple credit inquiries, which may cause lenders to view you as a higher risk. 

4. Maintain older credit accounts – The length of your credit history plays a big role in your score. Keeping long-standing accounts open (as long as they remain in good standing) can help strengthen your credit profile. 

5. Check your credit report regularly – Reviewing your credit report allows you to catch errors or fraudulent activity that could affect your score. If you spot inaccuracies, you can have them disputed and corrected. 

Common Questions About Credit Scores 

When it comes to understanding credit scores, many people find themselves asking questions along the way. Amanda Sheppard, our Consumer Lending Sales Manager, shared a few of the most common questions our Lending team receives from members looking to better understand their credit: 

1. Is it true that paying off debt too quickly can hurt my credit score? 

“Paying off debt fast can potentially cause a temporary dip in your credit score due to limited credit mix and shorter payment history. However, in the long run, paying off debt is always a positive financial decision!” 

2. Where can I find my credit report?  

“You can retrieve a free copy of your credit report from each of the major credit bureaus (Equifax, Experian, Transunion) at annualcreditreport.com.” 

3. Do you have to do a hard credit pull to apply for a loan? 

“Lenders typically do a hard credit pull to obtain your full credit profile. This will allow the financial institution to make a binding credit decision.” 

4. What credit score do I have to have to apply for a loan?  

“There is no minimum score required to apply for a loan. Lenders use the applicant's credit score to determine the interest rate on the loan.” 

5. How many points does a "hard pull" drop the score?  

“Generally, a hard pull lowers your credit score by less than five points. Your score usually rebounds within the next three months.” 

Five Star Can Help You Reach Your Credit Goals 

At Five Star Credit Union, we believe in brightening the financial futures of the communities we serve. Whether you're just starting to build credit or working to improve your score, our team of financial advocates is here to help. 

Our members also have access to free credit education resources on our website. To view our catalogue of mini courses, visit our Financial Focus Resources page. If you're ready to take the next step in strengthening your credit profile, explore our credit education tools available through Five Star or speak with a team member today!