Why Do You Have A Bad Credit Score?
If you have recently checked your credit score and you have been alarmed at the rating staring back at you, you may be wondering where you have gone wrong. You have never been in debt or you have never missed a credit card payment, so why is your score so low? There are many different elements that are considered when putting together someone’s credit score, and so we will take a look at some of the different reasons why you may have a bad score so that you can, hopefully, get to the bottom of the situation.
You are using a high percentage of your credit limit – One of the reasons why your credit rating may be poor is because you are using a high percentage of your credit rating. You can find out more about this at www.repair.credit. Let’s say you only owe $2,000 on your credit cards. Doesn’t seem too bad, right? In fact, you have a friend who owes $10,000. However, her rating is better than yours! How can that be the case? Well, if you owe $2,000 and the only credit that is available to you is $2,000, this means you are using 100 percent of your available credit, which has a negative impact on your score. If your friend owes $10,000 but she actually has $40,000 in total available via different cards, then she is only using 25percentt of the credit that is available to her. While your friend owes me, she is also able to show restraint, which is a great benefit. Getting your available credit usage to below 33 percent is ideal.
You have never owned a credit card – A lot of people assume that never owning a credit card is a good idea. After all, you have never been in debt. However, it is not that simple. Your credit report is designed so that lenders can get a credible picture as to whether you are someone credible to lend money to or not. If you have never owned a credit card, you have no borrowing history, and so there is no picture for lenders to go off, and this has a negative impact on your score.
You have made a lot of credit card applications lately – Do not make credit card applications for the sake of it, simply to see whether you could be accepted or not. Each credit card application shows on your account, whether or not you accepted the deal, and it has a bad impact on your score. Carry out soft searches, i.e. those that don’t show on your account, to find out whether you are eligible. Head to experian.co.uk for more information. Plus, try to only make one application per every six months.
So there you have it: some of the most common reasons for a poor credit score. Hopefully, you will now have a good understanding as to why your credit score is poor. There is no need to panic if any of the above situations apply to you. You simply need to put a plan in action to make the necessary changes, and your score will naturally improve if you do.