53% of people in the United States have been rejected for something due to poor credit. Whether they are unable to get a credit card, a car, or even a loan, having bad credit holds these things out of reach.
By learning more about the things that lower your credit score, you can avoid these factors to start improving your credit immediately.
Do you want to learn more about the components of a credit score and what factors contribute to your low credit? Keep reading this article for everything you need to know on boosting your credit score!
One of the biggest factors of your credit score is paying payments on time. In fact, this makes up 35% of your FICO credit score. Whether you have bills to pay for your credit cards, mortgage, or even student loans, making these payments late or missing them entirely will significantly impact your credit score.
If you are forgetful, you can start using automatic payments to avoid late or missing payments.
Having Too Much Credit or Amounts Owed
Next, you need to consider how you use your credit. When you apply for a line of credit, you typically have limits to how much you can use. However, you should never use too much of the credit you have available.
Typically, you should have a credit utilization rate below 30%. If you have a credit card with a $1,000 limit, this means you should only use $300 before paying it back. If you are wondering why your Experian credit score is low, it might be due to having too much credit in use.
This is because having a high percentage shows that you are at risk of overextending your credit, which may make it harder to pay back in the future. Instead, stick to a smaller percentage for your credit utilization rate.
No Credit History
Credit history plays another big factor in determining your credit score. If you search “check my credit score” and find that it is much lower than you anticipated, it might be that you have not had credit for long enough.
For example, if you open your first one of credit when you are 20, you will not have as much experience using your credit. This will typically keep your credit score low until you have had your line of credit for a year or two.
Because credit history plays a big role in your credit score calculation, make sure you never cancel your lines of credit. Keeping them open, even if they aren’t being used, is important for your credit score.
To learn more about how to improve your credit score, you can also get a credit score review & consultation.
Several Requests for New Credit
While opening new lines of credit is important for your credit score, you should be wary of how many requests you put in for new credit. While you can always get a free credit score check without damaging your credit record, having banks or other companies make inquiries about your credit may impact your credit score.
For example, applying for five new credit cards and only getting approved for one can be detrimental to your credit score. Make sure you only ever apply for the credit that you actually need.
Getting Denied Credit Requests
While the act of applying for new types of credit may not harm your credit score, getting denied for your credit requests is something that will almost always negatively impact your credit score.
As was mentioned before, your FICO credit score keeps track of how many credit inquiries you have made, whether you are applying for a loan, a new credit card, or anything else.
It will also keep track of how many new accounts were opened and how long it has been since you opened a new line of credit. The percentage of your new accounts out of the total number of credit inquiries is what affects your score.
If you are regularly getting denied credit, this can drop your score. To prevent this, you should only apply for credit that you are confident you will be accepted for.
Not Credit Mix
Finally, you need to pay attention to the mix of credit that you have. Having too few types of credit is another reason why you may have a low credit score. While many people think of their credit just as their credit cards, there are many other lines of credit you can use.
For example, getting a mortgage when you buy a house is a type of credit. Same with auto loans, student loans, and more. If you only have one type of credit, like a credit card, you may have a lower credit score.
Instead, you can open up different types of credit. Having a variety of credit types shows that you are a more experienced borrower and will increase your credit score. Having a portfolio with diverse types of credit is a sign that you are able to manage different credit products and can boost your score.
If your credit score hasn’t changed in a while, you may want to open a new type of credit.
Start Improving Your Credit Score
Improving your credit score doesn’t have to be confusing. Learning more about the things that lower your credit score can help you start improving your credit score today!
For better credit, make sure you make payments on time, have a mix of credit, and try to improve your credit history.
Do you want to learn more about how you can build credit, the highest credit score you can get, and more? The Credit Agents can help! Contact our team to set up a free consultation with our experts and get a free credit score check.