No one likes having a bad credit score. It can keep you from doing a lot of the things you want to do in your life, like getting a mobile phone contract, a loan, or a home. Unfortunately, many of us don't realize we have a bad credit score until it comes time to apply for one of these things, and then we are denied. The questions then start to arise, such as what caused my credit score to drop so low? And how can I fix it? We are here to answer some of those questions.
First, it should be noted that the causes we are going to go over below will not apply to everyone. The best way to see what is causing your credit score to be low is to get a full copy of your credit report. Then you can go over your file in detail and see what could be causing you to have a low score. Below are simply some of the most common causes of bad credit scores. Hopefully by going over these, you will be able to see them more easily within your own credit file and begin taking steps to correct them.
Your credit score is largely dependent on how you use your credit cards. Credit reporting agencies use your credit cards as a large factor in determining your credit score. There are several things that come into play here. First, how many credit cards you have will impact your score. If you don't have a credit card, then credit reporting agencies can't determine how trustworthy you are. On the other hand, if you have a lot of credit cards, it shows that you are somewhat impulsive and have trouble managing your cards. Second, no matter how many cards you have, your credit utilization will play a part in your credit score. Your credit utilization is a percentage of how much you have spent compared to the total amount of your credit limits. The higher your utilization, the lower your score will be. Lastly, how you use your credit cards each month will play a small part. If each month you are spending to the maximum of your cards, it will hurt your score. Be responsible with how you use your cards, and try to not over-do it.
The next biggest factor is your current debt level. If you owe a lot of money, it will drag your score down. We know it is easier said than done, but you should focus on paying off these debts as quickly as you can. Even if you just make a slightly larger payment each month, you can pay off your debts a lot faster. Once you do this, you should see your credit score start to fall.
Lastly, if you have a history of missing bill payments, this will severly harm your credit score. Missing a payment suggests you can't be counted on to make your payments, and this is a red flag in the eyes of the credit reporting agencies. Your credit score is there to help places like banks and mobile companies assess whether or not they can trust you. Even a single missed payment on your record can do some harm, so you really want to try and avoid this. The longer you can go making payments on time, the healthier your score will be. If you have missed a payment recently, it is going to take some time before your score goes back up. Just be patient and continue making the rest of your payments on time, and eventually it will rise again.