High credit card balances and late payments are common culprits, but there are other factors worth checking.
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Your credit score can be frustrating. Maybe its lower than you thought it would be, or maybe its stubborn and wont budge — no matter what you do.
While its true that credit scores are always shifting, even by a few points, a stubborn score can be especially perplexing if you thought you always paid on time and expected to have a good credit score. There are a few reasons why your credit score might not be going up or is in a lower credit score range than you thought. You can also take steps to help it grow.
Having a low credit score can be frustrating, especially if you’ve always paid your bills on time. You may be wondering, “why is my credit score low if I don’t have any late payments?”
There are several factors that influence your credit score beyond just payment history. Even with an impeccable track record of on-time payments other elements in your credit profile could be dragging your score down.
This article will talk about the main reasons why your credit score might be lower than you thought it would be and give you ways to raise it.
Common Reasons for a Low Credit Score Despite On-Time Payments
There are a lot of common reasons why your credit score is low even if you have never been late on a payment:
You’re Using a High Volume of Credit
Even if you haven’t missed any payments on your credit card bills, simply using a high volume of credit can have an effect on your credit score. When you use your credit card, you’re borrowing money from the bank.
Credit bureaus like it when you only use a small portion of your available credit on all of your accounts. This is called your credit utilization ratio. One thing that can hurt your score is high credit utilization.
You Have a Short Credit History
Your credit score is based on how long you’ve had credit. Generally, the longer your history, the better. If you just started using credit recently, lenders won’t have a long history to look at. A short credit history often leads to a lower score.
You Opened Several New Credit Accounts Recently
Every time you apply for new credit, the lenders perform a hard inquiry on your credit report. Too many hard inquiries in a short period can suggest higher risk to lenders and cause your score to drop.
Your Credit Mix is Very Limited
Lenders like to see a healthy mix of different account types in your credit profile, including installment loans and revolving credit like credit cards. If you only have one type of credit account, it can limit your score’s potential.
You’re an Authorized User on a Card with Missed Payments
Even if the missed payments aren’t yours, being an authorized user on someone else’s credit card that has late payments can negatively impact your credit score. Their mistakes effectively show up on your report.
There are Errors on Your Credit Report
Sometimes credit reports contain mistakes—accounts that don’t belong to you, payments incorrectly reported as late, etc. These errors could be inaccurately dragging down your credit score.
Tips to Improve Your Credit Score
If you have a lower than expected credit score, here are some tips to start improving it:
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Pay down balances to lower your credit utilization ratio. Shoot for less than 30% across all accounts.
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Avoid applying for new credit unless absolutely necessary so you have fewer hard inquiries.
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Become an authorized user on someone else’s old credit card to lengthen your history.
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Open a new credit card to add account diversity to your credit mix.
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Review credit reports thoroughly and dispute any errors with the bureaus.
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Set up automatic payments so you never miss due dates in the future.
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Check your credit regularly to catch any problems early.
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Consider credit counseling to help optimize your credit profile.
Have Patience and Stay Diligent
Improving your credit takes time and effort, but the payoff in terms of better loan rates and approval odds makes it worthwhile. Stay focused on the steps above, and you should start seeing your score slowly increase. Remember—patience and diligence are key!
With a consistent, responsible approach to credit management, you can turn around a poor credit score over time, even if you have no late payments. Monitoring your credit reports and score regularly will help you track your progress and catch any potential issues before they do major damage.
There’s a missed payment lurking on your report
Payment history, or your record of on-time payments, is the most important factor FICO and VantageScore use to calculate your credit scores. That means a single payment that is 30 or more days late can send your score plummeting. Worse, late payments stay on your credit report for up to seven years.
The impact of a payment mishap fades with time, though. Continuing to pile up a stretch of on-time payments will help offset the damage, but recovery will take longer than with high credit utilization.
You are new to credit and have a short credit history
There’s a general rule when it comes to credit: The longer your credit history, the more favorable your score. Lenders like to see that you have a documented history of on-time payments when assessing your creditworthiness.
But there isnt much you can do to age your credit other than keep your accounts open. If theres a card in your wallet not getting much use, putting a smaller, recurring expense on it signals to the issuer not to close the account for inactivity.
You might also consider becoming an authorized user on a trusted family members credit card, especially if they have been using credit for a while. You can potentially benefit from their lengthy credit history — and lower your credit utilization by raising your total available credit — without the worry of an added bill. Because your credit doesnt need to be checked to become an authorized user, there wont be a hard inquiry to ding your score.
How To Fix A BAD Credit Score ASAP
FAQ
Why did my credit score go down if I never missed a payment?
If you applied for a credit card or are shopping around for a loan, a hard inquiry may appear on your credit report, which temporarily lower a score. When a lender or company looks at your report to decide whether to lend you money, this is called a “hard inquiry.”
Why is my credit score low if I pay everything on time?
If you’ve been having higher utilization of your cards, it could drop your credit score, even if you pay the card in full. Keeping a balance of under 70% or even 50% at all times is ideal. If you’ve had inquiries, it can also negatively impact your credit since you’re looking for “more loans/debt ”.
Why is my credit score low when I owe nothing?
If you have no record of handling credit previously, lenders have no evidence that you can borrow responsibly. This is referred to as having “thin credit” and can give you a lower score than you’d like. Thin credit can mean you have a low credit score, despite having no debt.
Why is my credit score low for no reason?
… factors contribute to a low credit score, including little or no credit history, missed payments, past financial difficulties, and even moving home regularly.