Do you know why your credit score is so low? Understanding the ins and outs of credit is difficult. It doesn’t matter if you’re a seasoned veteran of building good credit history or brand new to this journey- it’s confusing sometimes.
Knowing the things that may make your number drop is crucial for keeping that good score afloat. Some of the reasons why your credit score is so low might just shock you.
Credit Score Factors
Irresponsibility
Missing payments can bump your score down quickly. Even just one missing payment can change things, so make sure to prioritize paying those bills.Â
Using too much credit, even when you have it and regularly pay your bills on time, can also hurt your score. Using credit cards too much can cause lenders to believe that you are too dependent on credit. This can become a red flag and may cause your score to go down.
The same idea goes for if you apply for a lot of loans at one time. Even if you pay those bills on time, lenders may see that and assume you’re overly dependent on credit.
Things like repossession, foreclosure, bankruptcy, and other indications of negative history on your account are red flags as well. These affect your history for a long period of time. All of these can easily explain why your credit score is so low.
History
Your credit history is arguably the most obvious factor in why your score is so low. Your history of borrowing money plays the biggest role in the score you have. This includes accounts owed, the length of your credit history, and the number of credit transactions.Â
Your credit history will tell lenders a lot about how you handle your money as well as other people’s money. This leads them to determine how you will handle the money that they will potentially lend to you.Â
Credit Mix
Having a background of various forms of credit history can help up your score. Proving that you successfully paid back the money you borrowed by the time it was due is extremely helpful to your score. This is especially true if it’s from various lenders and types of loans.
30% Rule
It’s important to aim to use less than 30% of the credit limit on your card to maintain a good score. Spending more than 30% can cause your credit to go down faster than nearly any other factor besides missing payments.
This is a huge factor in maintaining a healthy credit score, so pay attention to how much you spend. Keeping track of this and paying your bills on time could be the huge push your credit score needs to stay afloat.
Identity Theft or Human Error
If your credit score is still low even after checking all of these options, it may be time to consider other issues. Identity theft can be a reason why your credit score is so low.Â
A mixed credit file is another rare but possible issue to consider. It’s possible that the lender mixed you up with someone who has the same name as you.Â
Incorrect account reporting is another factor. This can involve a whole variety of issues that you may want to discuss with your lender. Accidentally closed accounts, incorrectly marked late payments, credit limits, or double entries of loans or debt can all be factors.
It’s never too late to fix your credit.
It can be easy to worry about your credit score, but remember that it’s not everything that you are. Your low credit score doesn’t have to define you.Â
Use these tricks to keep yourself accountable for your finances and regularly check up on your accounts. You will soon see your credit begin to build up again.
For more smart money advice, check out our article Useful Budgeting Apps That Actually Work.
