3 Reasons Why Your Credit Score Is Poor
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The importance of maintaining a good credit score cannot be underestimated. If your credit rating is poor, you may be feeling a bit perplexed as to why this is the case. Even if you have made all of your payments on time, your credit rating may be poor for other reasons.
Here are some of the different reasons why you may have a poor credit score:
No Credit History
One of the main reasons why people have a bad credit rating is because they do not have any credit history. You may think that the fact that you have never owned a credit card in your life is a good thing. However, what it means is that the credit rating agency and potential lenders do not have any information they can use to determine whether you are a credible person to lend to or not.
They won’t know whether you make your payments on time because you have never had to do so. In order to rectify this issue, you should apply for a credit card based on the reviews of each card. Once you’re approved, make a few purchases or pay a couple of bills with it every month. Always make sure you pay off your statement in full each month too. If you do this, it will definitely improve your credit score.
Too Many Credit Applications
Even if you’ve been declined, credit applications will show on your credit report for six months. When looking for a credit card, you shouldn’t submit an application just to see if you might be accepted. A lot of people apply for credit cards they know they won’t be approved for simply on the off chance that they are. The problem with this is that too many applications can significantly reduce your credit score. You should use an eligibility checker before submitting an application and only apply for credit cards that you have a high chance of being approved for.
Using Too Much Available Credit
It will also have a negative impact on your score if you’re using more than 33% of your available credit. If you’re using all, or almost all, of your credit, this will lower your score even more. You can improve your credit score by paying down or paying off some of your credit cards.
When you pay off a credit card, you shouldn’t close it completely. By closing it, you’re just reducing your overall credit and therefore the amount you owe will still come in at a high percentage rate because your available credit is lower.
Read Also: How To Improve Your Credit Score: The Basics
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