Most people soon come to the realisation that’s what in the balance isn’t the only indicator of financial health. The ability to borrow, and the freedom to borrow on good rates, is just as important. However, that access is often dictated by your credit score, which you might learn isn’t in as great a shape as you thought. The reason behind that isn’t always straightforward, so let’s look at why you might receive a nasty surprise.
You’re falling behind
We have to take the Occam’s Razor approach, first of all. The most obvious answer is often the right one. The most common reason for poor credit scores is because you haven’t been managing your debts as well as you should. Make sure you catch up on any existing debts and clear them, but also look at whether you’ve ever defaulted on an automated payment for a service or subscription. Any failure to pay what you agreed to pay will hurt your score for some time.
Making use of credit can build your score. However, using it too much can make you look like a riskier prospect to lenders. They won’t just look at what loans and credit cards you’ve managed, but your credit utilisation. Sites like nerdwallet.com show you how to find the balance of being able to use credit but not to the point that it starts making you look irresponsible. Paying more than the minimum on credit cards is a good way to improve your utilisation rate, for instance.
Bogus black marks
It’s worth taking a look at your report in detail if you haven’t already. Erroneous reports of poor credit conduct happen more commonly than you might think. Creditrepair.xyz offers a look at the services that can help you challenge those records. If you see a debt that you’re certain isn’t yours or you know you have paid off, contrary to what the lender is saying, contesting it is the only way to get it off.
You have no history
You might like to think that we’re all born with a clean slate, but lenders don’t see it that way. For a lot of loans, they need proof that you’re a reliable credit user in advance. Establish a credit history with accessible and easily repayable loans and cards first and foremost. Just make sure you have a repayment strategy in place to give your credit score the most impressive impact.
You pay loans back too soon
In a rush to repair their credit, many people will start getting rid of debt as soon as possible. That’s a wise move. But getting rid of loans early? That’s not as simple. Experian.com makes it very clear this won’t help your credit score. Though you paid back what you owed, you have gone outside the contractual agreements you made, which doesn’t make you look more reliable for long-term payments.
The tips above should hopefully shed some light on a low credit score as well as proposing a few methods to get yourself back on track. Awareness is the first step, now you have to start rebuilding.