Causes of Bad Credit Scores

Credit scores are very important to just about everyone. Whether you are applying for a mortgage, a loan, or a mobile phone contract, your credit score will be checked to determine if you are eligible. If you have a low credit score, you will often be rejected for things you need in your life. When this happens, it can be hard to figure out why your credit score is low. Credit scores take in so many different factors that it can be hard to know which one is causing your score to drop. Below are some of the most common causes of a low credit score. Go through the list and see if any of these apply to you. If they do, you may have found the culprit.

  1. You're in debt - Owing too much money is sure to have a negative effect on your credit rating. If you have loans out, try and pay them back as quickly as you can. We know this sounds easier than it is, but if you can make even slightly larger payments on your debt each month, you'll pay it off faster, and save money on interest charges too. You can also consider consolidating your debt into one loan to make payments easier to manage.
  2. You've missed payments - No matter if you eventually paid off the bill, if you were late on a payment, it probably lowered your credit score. If this happened several times, you can be sure it did. These missed payments will follow you around for a long time, so it is important to stay on top of them from the beginning. If you know you have missed some payments in the past, start making sure you pay them on time now. The sooner you start keeping a tighter schedule, the sooner your on-time payments will start to outweigh your missed ones.
  3. You've mismanaged your credit cards - Credit cards are a great way to increase your credit score, but only if you use them right. If you spend up to your credit limit, it will hurt your score. Conversely, if you keep your card tucked away and you never use it, that will also hurt your score. Try to spend at least a little bit on your card each month, and then pay it back at the end. Don't spend more than you can afford. By keeping your credit cards in line you will demonstrate that you can be trusted with credit and that you know how to handle it responsibly.
  4. You don't have a credit history - The last reason could simply be because you don't have a credit history. If you don't have any credit cards, bills, or loans, you won't have a credit score. Without these things credit reporting agencies don't know how to rate you. Start by applying for some simple credit cards, or even store credit cards, to build up your credit history. You can also have some bills transferred over to your name, just be sure they are paid back on time.

If you've gone through the list and you don't think any of these apply to you, you should get a copy of your credit report. On there you can see everything the agencies have on you, and if there are any mistakes. Sometimes simply pointing out a mistake to the credit reporting agency will improve your credit score. If not, you may have a larger problem and you should consider seeking professional advice.