6 Reasons Your Credit Score Is Suffering

Is your credit score still an enigma? There are some surprising reasons yours could suffer: here are six more common examples of things that will negatively impact your credit score.

 

1. Missed or Late Payments

Missing or late payments are one of the primary reasons you might have a lower-than-average credit score. Credit bureaus see those making timely payments as being more reliable and responsible. So, even missing one payment can significantly lower your score. Avoid this by ensuring you make your minimum payments on time, ideally by setting up automatic payments to take any brain power out of the equation.

2. High Credit Card Balances

A high balance tips off lenders that you might be overextending your finances. You should aim to keep your credit utilization below 30% of your credit maximum for the most negligible impact on your score. If you have a high balance, adjust your budget to make larger payments to get that number down sooner rather than later. You should also avoid using this account so you aren’t treading water with your payments. 

3. Too Many Hard Inquiries

Applying for a new line of credit will likely include a hard inquiry. One or two of these usually aren’t a big deal; when you start racking them up, it can affect your credit score. Inquiries indicated that you’re grasping at straws to organize your finances. To mitigate this, limit the amount of credit cards or lines of credit you apply for at any given time.

4. Going Into Collections

Failing to pay off your debts means they’ll often get sent to collections. Accounts that make it this far will impact your credit score, not to mention they’ll usually hound you for the money until you pay. These types of credit report infractions can stay on your credit report for up to seven years. Your first instinct might be to ignore these calls. But the secret is actually being upfront with the debt collectors and negotiating a payment plan if possible.

5. Lack of Credit Diversity

If all you have is credit cards, you likely won’t have as high a credit score as someone with a more diverse credit history. This often shows that you can manage many accounts responsibly, proving to lenders that you’d be responsible should you open something with them.

There’s no easy fix to this since you shouldn’t just open accounts to diversify. Still, if it makes sense for your finances, opening an account strategically could help you improve your score.

6. Closing Old Credit Accounts

It seems like it’d be wise to close credit accounts if you’re no longer using them. Unfortunately, this can often backfire: the length of your credit history plays a significant role in how high your score is. Maintaining accounts over more extended periods looks much better to lenders.

Even if you have old accounts you don’t intend to use anymore, it’s generally best to keep them open unless you have a good reason to close them.

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