Having trouble increasing your credit score? Here are 6 potential reasons why
For the credit-conscious consumer, it’s annoying that your credit score just doesn’t seem to budge. You check it every month, and it’s the same as the last time you watched it.
If you’re wondering why your credit score hasn’t increased lately, here are the most likely causes.
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1. You are using too much of your available credit
Of all the factors that determine how your credit score is calculated, the one that has the most impact on a monthly basis is your use of credit, which is the portion of your total available credit that you use.
As a general rule of thumb, you should aim to stay below 20-30% credit usage at all times. So if you have $ 10,000 total credit available on all of your cards, you would never want to have more than $ 2,000 to $ 3,000 in balance.
If your balances are above this range, it is probably lowering your credit score.
2. You missed one or more payments
Here’s the good news – late payments only count towards your credit score when they are 30 days or more past due. If you miss a payment by a week, you may have to pay late fees, but it won’t affect your credit score.
The bad news is that missing a payment within 30 days or more can hurt your credit score. It can also take over a year for your score to recover, so even if it’s been a while since you missed a payment, that would explain why you’re still struggling to increase your score.
3. You request new accounts too often
When you apply for new credit, the bank / lender pulls your credit report, which results in what is called a rigorous credit check. A single credit check isn’t a big deal, as it will usually lower your FICO® score (the most used type of credit score) by less than five points.
However, you might have a problem if you frequently apply for new credit. These credit checks can add up. Even if they don’t lower your score, they could prevent your score from increasing and cause you to stumble.
4. Your accounts are not old enough
Credit bureaus use the average age of your credit accounts as a rating criterion, and older accounts are better for your score.
If you’ve opened one or more accounts in the past year, those accounts may need to age a bit for your credit score to rise. This problem is particularly common among consumers who open many credit card.
5. You have a major negative event on your credit report
Certain events, such as a declaration of bankruptcy, a default on a loan or the use of a collection account, can have a significant impact on your credit score. Not only will they lower your score dramatically, but they will also continue to affect your credit for years to come.
If there are negative things like this on your credit report, it may take six months, a year, or more for your score to start rising again. Of course, you should review your credit report at least once a year to make sure there aren’t any false negatives that are causing you problems.
6. You already have an excellent credit rating
The higher your credit score, the harder it is to keep raising it. When your score is in the 500 or 600 range, you can increase it just by doing nothing wrong. Pay your bills on time, don’t overuse your available credit, and your score will increase steadily.
Once your score is in the 700s, increasing it can be more difficult. You can continue to improve your score, but the progress will be slower.
While you can work hard to maximize your credit score here and get it as high as possible, first you need to ask yourself if it’s worth it. The truth is that once you achieve a FICO® score of 760-780, your credit score is quite high.
Getting your credit score back on track
With all of the different factors that affect your credit, it’s normal for your credit score to have occasional growing pains. Once you identify the problem, you can correct it and see your score increase again.