Fresh perspective for financial success

The Credit Gambit: Smashing the Façade on Building Better Credit

For avid chess players, or bingers of The Queen’s Gambit on Netflix, a gambit is a familiar concept: open the board by sacrificing a piece for the sake of a later advantage. But did you know that your credit follows the same playbook? When your credit score is not perfect, it can seem counterintuitive to take on more credit or make changes to your financial picture. Still, these can be great strategies for building and maintaining your credit score.  

In this article, we will cover four great ways to improve your credit health. But, to improve your credit score, you need to understand it first.

What is a Credit Score?

Also known as a FICO (Fair Isaac Corporation), credit scores offer a glimpse into your ability to pay back a loan. Your credit score influences getting approved for a credit card, student loan, rental application, or even getting cable and internet set up. Ranging from 500-850, the higher your score, the better your chances for speeding through financial roadblocks.

How is it calculated?

Your credit score is made up of five weighted categories, and your score can change each time new or updated information is reported by creditors.

How is it used?  

When you submit an application for a loan or for a service that requires monthly payments, your credit score is often used to gauge what kind of risk you are. An institution can use two kinds of inquiries to check your creditworthiness: a hard credit inquiry or a soft credit inquiry.  

A hard credit inquiry, also known as a “hard pull,” is typically done by a financial institution when you are applying for a revolving line (credit card) or installment loan (mortgage, auto). A hard pull cannot be conducted without your permission as the borrower. On its own, a single hard pull will have a minor impact on your score. However, multiple hard pulls in a brief period can have a larger adverse effect on your FICO. 

A soft credit inquiry, also known as a “soft pull,” can be conducted during events that do not necessarily result in taking on additional debt. Examples include background checks and pre-qualifications from lenders. Soft pulls can be conducted without your explicit permission. Unlike a hard credit inquiry, a soft pull does not impact your credit score and the inquiry itself does not show up on your credit report. 

Strategies to Build Your Credit 

Now that you understand what a credit score is and how it is used, here are four strategies you can use to improve your credit score:  

  1. Stay on top of your score. You are entitled to a free annual credit report, but many services offer unlimited free reports. Your score changes throughout the year; knowing when it is changing and why is critical to your financial health. Staying on top of your credit can help you catch incorrect information and potential identity fraud at the earliest stages.  
  2. Make on-time payments. Paying your liabilities on time has the most significant impact on your score. This should be your number one priority as it relates to your credit.  
  3. Improve your credit utilization ratio. Your credit utilization ratio is the amount of credit you are using divided by the amount of credit available. So, if your credit card has a limit of $5,000 and you have $500 on it, your credit utilization rate is 10%. In general, keeping that rate below 30% is ideal in building your credit. A high credit utilization ratio can often be viewed as an elevated risk to lenders. Is your credit utilization ratio too high? Consider a debt consolidation loan with BHG!  
  4. It takes credit to build credit. Taking on credit is not bad! Having multiple forms of credit (with on-time payments), demonstrates your ability to manage debt successfully, which improves your creditworthiness. However, it is important to think twice before taking on additional debt. Do you need it, and will you use it? Are you comfortable with the cost (rate, fees, term)? Taking on too much debt, especially in an abbreviated period, can adversely affect your score.  

Have more credit questions? Join us for our upcoming webinar, The Credit Gambit: What Your Credit Score and Chess Have in Common, on July 29th at 2 PM ET.  

More about BHG: Leveraging the power of data, analytics, and innovative technology, BHG is one of the best sources of working capital and personal loans for professionals. With decades of innovation, BHG offers solutions across all industries, healthcare facilities, and financial institutions. Ready to explore hassle-free financing options with affordable monthly payments? Learn more at