Did you think that you’re destined to have a poor credit forever? Think an excellent score is another far-fetched fantasy?
You may have a vast understanding that your credit score is screaming “low” because you can’t repay your student loan, have trouble paying down your medical bills or ran up some credit card debt when you were young. But do you have a basic idea of why your score always fall to the low side? Most people have no idea.
The good news is that a close observation of your credit history can prove an answer to your question. It can also breathe life to the possibility of improving your score. We’ve highlighted a few common loopholes you’d like to look out for:
When You Use Too Much Of Your Available Credit
When your credit card balance gets close to or reaches their limits, it give a wrong impression to a lender about your level of responsibility when it comes to using credits.
Your credit card utilization has a huge effect on your credit score. (Reminder: Credit card utilization is the amount of credit used versus the available balance. If your credit card limits amount to $1000 and your balance is $500, that’s 50% utilization. )
Don’t depend on your credit cards for average spending. To lower your credit utilization and increase your credit score, don’t expand your monthly budget with your credit card. Think of it as a debit card; never spend what you never had.
Not Paying Your Bills On Time
The most crucial item that weighs into your credit score is your payment history. Payment history accounts for over 35% of the total grade.
While people with low scores aren’t bugged to pay bills late, they still form the highest category for late repayment than those with higher scores. (11% versus just 0.18%). Always pay your bills and on time. With how important payment history is to your credit score, the remedy with those with low credit is obvious. Get into the habit of regularly paying your bills and on time.
If you’re finding it hard to pay the bill, think of ways to make them smaller. You could save lots of money by getting in touch with utility companies and request for discounts.
When You Have Accounts in Collections
The majority of people having low credit scores has their credit card with “derogatory” status. They include things like bankruptcy, collections, tax liens, to name a few.
Even after cleaning up your act and getting your debt and spending habit under control, the derogatory marks can downgrade your credit score. If your credit history is dragging you down, begin by studying your credit report. There you can detect what’s actually affecting your credit score.
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