How did you feel the last time you checked out your credit report? Was your score lower than you anticipated? We all want the security and freedom of a great credit rating, but many factors go into making it happen. If you’re wondering why your score isn’t where it needs to be, here are five reasons to consider.
1. You don’t keep an eye on your credit report.
So, you finally checked out your report and saw your less-than-desirable score. How often do you do this? You’re supposed to do so once a year, just to ensure that there aren’t errors, fraud, or other mistakes popping up.
You can dispute inaccuracies that turn up on your credit report, so make sure you check regularly.
2. You don’t have the right number of cards.
How many cards you have, apply for, and use has an impact on your rating. Applying for a ton of cards can drag your score down real quick, as can the old “churn and burn” method you can read more about.
But having one card and using it all the time can be just as bad. That’s true even if you pay your balance off in full every month. You want to keep your utilization rate low, and leaning heavily on one line of credit often isn’t the way to do that.
3. Your payments are late.
“Well, at least I paid!” you say. Sorry, but that isn’t good enough. Letting payments slide will always have a negative impact on your score. If you are 30 days or more late on a payment, it will always appear on your report and drag the rating down.
Payments are the biggest factor in how good or poor your score is, so stay sharp in this area. It will be seven years before a late payment leaves your report!
4. You have accounts that have gone into collections.
Even if your credit card strategy is a good one, having any other accounts that go into collections can negatively affect your credit rating. This includes hospital bills, utilities – anything that a collection agency can pick up.
This one often eludes people with otherwise good credit for one very good reason – they don’t even know they’re in collections. Hospitals, in particular, will sell off your debt at the drop of a hat, so double check every account you owe on and see who is currently managing it.
5. You haven’t given yourself enough time.
If you’re starting from scratch following a huge drop in credit or no credit at all, you cannot expect your score to soar in a matter of weeks or even months.
A good 15% of your score hinges on your history. If you have a bad history or no history, this will obviously hold you down for a while. Be patient.
Even people who behave responsibly with their cards have fair or poor scores. As we learned, not checking your report regularly for errors, leaning heavily on one card, or having a thin history can keep your score from rising to a very good rating. Check your report as soon as you can, dig into your past, and examine accounts for collections.