Why is my credit score is low? This is perhaps one of the most common questions most individuals ask themselves when they find out they have a low credit score. The only thing worse than getting an unpleasant surprise is to get an unpleasant surprise about your finances. If you are in such a predicament, here is an overview of some of the most common reasons that might bring about this.
This is perhaps one of the major contributing factors when it comes to a poor credit rating. When an individual’s rating is being calculated, past payment history is usually factored in. while one or two late payments on your credit cards, your mortgage or any other financial obligation over long periods of time might not have a huge impact on your overall score, making a habit of it might end up damaging your score in the long run.
According to ChargedOff.org a charge off specifically can significantly affect your score in a negative way. A charge off usually comes about as a result of not paying off your credit card for prolonged periods of time: usually six months in a row. As such, you should ensure you pay off your credit bills or loans in time.
Not Paying the Minimum Due Amount
For individuals who might be asking themselves why is my credit score is low, then not paying the minimum due amount on your cards is also another contributing. There is a common misconception that making a payment even if it is lower than the required amount will keep one in good books with the company in question. However, this is not always the case, some companies have strict financial guidelines and as a norm do not hesitate to report your account as past due. Paying less than the required amount will also result in additional charges that will eventually drive up your debt.
Too Many Cards
While it can be quite tempting to sign up for department store credit cards or credit cards with extra savings or free gifts, doing so can be quite detrimental to your score. The reason behind this is that, even if you may not be using the cards potential creditors might worry that you might not be able to make payments if you decide to use all the cards. Additionally, the numerous inquiries into for your credit card report might be misinterpreted that lenders are on your neck or you might be having financial woes.
High Debt Levels
High debt levels can also have a negative impact on an individual’s score. Reason being, potential creditors might question your ability to pay off existing or any new credit cards because they consider you as a high risk customer. When faced with such a predicament, it is usually advisable to reduce your debt level and at the same time carry out a credit repair to see if your score might improve.
Error on your Credit Report
Having an error on your credit report might also bring about a dismal score on your credit. if you review your report and credit history and feel that your score is lower than it should be, then carrying out credit repair should be your next course of action.