Why is my credit bad? - Your credit maybe considered bad and causing a low score for a number of reasons. While there are numerous reasons for bad credit some of the more common ones are as follows. You have numerous credit cards that are maxed out or close to the credit limit, you have unpaid judgments or collection accounts, you have 30 day late payments showing on your payment history. All of these examples can cause severe drops in your credit score.One area people overlook that can negatively impact their credit report is failing to honor mobile phone contracts. Cell phone companies give away free phones to customers who sign on with their services for a specified period of time, usually one to two years. Terminating subscription to the phone service before the expiration and failing to reimburse the phone carrier for the cost of the free phone is considered breaking the contract. Cell phone companies would then report to the credit bureaus and cause a blemish on the credit history. Such blemishes are not serious, but they nonetheless lower credit scores.
Credit scores generally range from about 350 to 850.
- 800+ = great credit
- 700-799 = good credit
- 600-699 = average credit
- 500-599 = bad credit
- under 500 = hard to get a loan at all
Your credit can be bad for a variety of reasons:
Late payments
High Account Balances
Bankruptcy
Collections
Chargeoffs
To minimize negative on your factors you will need to pay down balances, make payments on time, dispute incorrect information, and let the passing of time lessen the impact of past bad credit.
Too many inquires at one time can affect your credit score.
If your credit score is low because of a high balance on a credit card, transfer some of the balance to another card. Try not to open a new card because to do this can also reduce your score.
One reason why your credit may be bad is because of erroneous information reported on your credit report. This can happen to anyone and is actually quite common. This is one reason why you need to check your credit report out at least once per every 12 months. By checking you credit report for free you can keep an eye on your credit and make sure that you take care of any erroneous information when it happens, not when you are trying to apply for a loan and it comes as a surprise to everyone. Utilize your one free annual credit report each year to take a look over your credit to make sure everything looks well. There are many reasons as to why credit report errors can happen so make sure that if errors do happen to you that you rectify the situation immediately.
Maintaining high balances on your credit cards and other revolving debt negatively impacts your credit score. Paying down credit cards balances below the 70%, 50%, and 30% thresholds is a quick way to boost your credit score.
Paying down your credit card balances to around 30% will help your score. If you can, try to keep the balance at that level at all times. If you need to raise your score quickly, and don't have the money to pay down your balances, you may request that your creditors increase your credit limit. This will in turn lower your balance in comparison to the limit.
Only use this technique if you are responsible with your credit. Once your limit is increased, it may be tempting to go on a shopping spree. Know that if you do this, you will be in a much worse situation than when you started. Not only will you have more debt, but you will increase your ratio of balance to limit.
You should frequently check your credit report at least twice a year to know what your credit profile looks like. Sometimes erroneous items appear on credit that you may not know about and when it comes time to utilize your credit it can affect the rate you will get. Depending on the state you live in, you are allowed at least one free credit report per year from each of the three major credit bureaus; Experian, Equifax and Transunion.
Watch on your credit report for companies that are illegally renewing the charge off date every month in order for the account to never gain history. These companies you should call and address this immediately.
Here is a general guideline which outlines the five major types of information used to calculate a FICO score. Each type of information counts as a percentage of a total FICO score:
- 35% Payment History
- 30% Amounts Owed
- 15% Length of Credit History
- 10% New Credit
- 10% Types of credit
There are several ways to increase your credit. However the fundamental principle is the bills must be paid on time. This doesn't mean by the due date. For the sake of your credit a payment must NEVER be more then 30 days late. If you are acquiring 30 day lates on your credit then your credit standing will deteriorate quickly. Judgments also hurt your credit even if you pay them.
It is also important to note that a credit score is a snapshot. Although it shows your payment history, length of credit, etc., having inaccurate (negative) information removed from your credit bureau report will immediately reflect an increase in your score.
If you do decide to pay off some of your credit cards, be sure to leave the cards open. The credit bureaus look favorably upon accounts that have been open for a substantial period of time, especially if they are showing a zero balance.
Remember that a credit score amounts to a prediction of how likely it will be that you go 60 days late or more on your mortgage in the next two years. One thing that will really lower this score is if you carry high balances on revolving debt and then start making a few of the payments late. This is the pattern of a consumer who is close to getting in trouble with debt.
Things that may go into a collection or judgment that will hurt you credit include unpaid medical payments, unpaid utility payments, and unpaid cell phones or cable payments.
If you have old collections on your credit report, paying them off now can actually hurt your credit. Credit Agencies look at the age of a delinquent item: if you pay it off the "date of last activity" becomes recent instead of old. There are many reputable credit repair agencies or credit counselors that can help guide you in restoring your credit.
To answer questions concerning your credit, how to improve your credit, and any other concerns - contact [name] at 888-275-6788. [name] can help you understand this very important aspect of obtaining the best mortgage for your situation.
Why is my credit score so low? - Even though you may make your payments on time, there are other factors involved that determine your credit score.
Public records such as a tax lien, mechanic's lien, foreclosures, and notices of default can drive your credit score down very quickly.
Sometimes, an unpaid medical or utility bill will be sent to a collection agency. Many people don't know this goes on their credit. This is another factor that brings credit scores down.
If you have credit cards, you should try to keep the balances below 50% of your credit limit. Having credit cards that are maxed out will significantly lower your credit score, even if you make your payments on time.
Whenever you make a large purchase - a new car, furniture, etc. - it will lower your score temporarily until you demonstrate you are making the new payments on time. For this reason it is important to not make any large purchases if you are thinking of buying a new home or refinancing your existing mortgage. Wait until the new mortgage has funded before making any other purchases.
Too many credit inquiries as a result of multiple credit applications within a short period of time can also lower one's credit score. Therefore, one should avoid applying for multiple credit cards simultaneously. However, getting your own credit report does not count as a credit inquiry and has no effect on the credit scores.
Why is my credit score so low? - Your credit score is calculated by using several different key factors. Any one of these factors could be the reason that your credit score is lower, than you would prefer.
Sometimes just the date itself can play a factor in a low credit score. If you pull your credit right after running your card balances up but before paying them off or down, then your score will be affected. There can be many reasons for a low score.
One of the easiest ways to improve your credit score is to keep all of your credit cards under 33% of the available balance, and to use them on the regular basis. An account used and paid off monthly will lead to a higher score than an account which carries a zero balance and rarely used.
Having so many inquiries on your credit report will have negative impact on your score. Always reconsider when applying for any financing, including the departmental cards, because each application will cause one more inquiry on your credit report.
If there is an item on your credit report that negatively impacts your credit scores, which you disputed with the vendor and to no avail, you may want to dispute the item with the credit bureaus. Write a letter to each of the three repositories to state your reasons. The credit bureaus will place the burden on the reporting vendor to prove their case.
Always pay your bills on time. Late pays on credit cards and especially mortgages will drag your credit scores down.
Any negative activity on your credit accounts will affect your credit score for 7 years. This includes late payments, repossessions, defaults, foreclosures and bankruptcy.
If you have co-signed a loan for someone else, their late payments or a default on that loan will affect your credit score.
If you have older collection or charged off accounts with balances, consult your mortgage professional BEFORE paying them. If these tradelines have not been updated in a while, they actually affect your score for the better. Once you make a payment on them, the creditor will update the tradeline resulting in a dramatic decrease to your score.
If you have a good history of making your credit card payments on time you should consider requesting a credit limit increase.
An increased credit limit can have a positive impact on your credit score because the increase in amount of available credit is given consideration by the credit bureaus.
Requesting a credit limit increase is as easy as calling the toll free number on the back of your credit card.
The length of time in which you have had credit also affect your score.
When applying for a mortgage loan, the first credit report inquiry will be reflected as one "hit" on your report. Any other mortgage inquiries run on your credit report will not be reflected until 30 days later at which point all inquiries will be reflected on your score.
Lates on your mortgage payment will also take a heavy toll on your credit rating.
You may have a high balance to limit ratio. This means the combined balances of your outstanding debt is greater than 50% of the combined high credit limit. The greater toward 100% of your combined high credit limit you get, the more negative the affect on your credit score.
You may want to pay attention to closing old accounts and opening new accounts. In other words when you pay off a credit card account, do not close that account-keep it open. The length of time your accounts are open and the total number of accounts that you have can negatively affect your credit score. If you have 15 credit accounts open and they are all within 24 months old this may lower your credit score as opposed to someone who has 6 credit cards open that have all been open for 7+ years.
Often times a credit report is showing incorrect information that could be detrimental to your credit rating. Insuring that all information is reporting accurately can help keep your credit scores at a higher level. If you find any incorrect items on your credit report you should contact all 3 credit bureaus and work on correcting them.
The type of credit accounts you have will also play a part in determining your scores. You should maintain a variety of credit lines such as Auto loans, Credit cards, Mortgage, etc.
Monthly online credit monitoring services and programs are a great way to stay up to date on your credit score, learn how to manage it, and maintain an intelligent financial balance and borrowing power
Why is my credit score so low? - There are a variety of reasons that a credit score can be low.
Judgments and Liens affect your credit score adversely. The more recent they are, the more they lower your credit score.
Collections and charge-offs also lower your credit score. Again, the more recent, the more they lower your credit score.
Late payments on installment loans, mortgages and revolving accounts, such as credit cards also lower your credit score.
Excessive inquiries raise questions as too, how much debt have you taken on. If there are too many inquires, then you might have open way too many accounts and won't be able to take care of the mortgage you are applying for.
Negative credit information affects your credit score for seven years or more. Late payments can affect your score almost immediately, but it can take 6 to 12 months of paying on time to start seeing a positive effect on your score. Financial difficulties from five or more years ago can still significantly affect your score.
When your balances are high in proportion to your limits on credit cards, this negatively impacts your scores! For example, if you have a $300 credit limit, you should NEVER put more than $150 MAX on this credit card. The best advice is to never charge more than 15% of your total available limit and pay it off IN FULL every month. The idea that carrying a balance on your cards helps your credit is simply a myth.
Something you can do to see a fairly immediate impact on your scores is to spread your debt across all of your debtors more evenly. For example, if you have a $9,000 debt with AMEX with a $10,000 limit and a $10,000 VISA with no balance at all, split the $9,000 debt across both cards. This will
a) Give you the opportunity to take advantage of a 0% balance transfer rate for 6-12 months that many companies provide and
b) Lower the Loan-to-Value on the AMEX card from 90% to 45%, giving you an immediate boost to your FICO score.
Excessive inquires on your credit file will also negatively affect your credit score. Each time your credit report is pulled it will lower your score down a bit. If you are shopping for a mortgage and your credit is pulled a few times in the same week or so it will only count once. Asides from that, lenders and credit grantors will sometimes see excessive inquiries as a sign of desperation to open up credit accounts.
Your credit score is made of the following 5 criteria
- Payment History - 35% Impact
- Outstanding Credit Balances - 30% Impact
- Credit History - 15% Impact (Length of time established)
- Type Of Credit - 10% Impact (Mix of mortgage, auto & revolving preferred)
- Inquiries - 10% Impact
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