Bad Credit Report Score

Poor credit score report cost you money.

The credit score is the most important part of your credit report. Many lenders rely solely on your credit score without going into details. Having a good credit score will not only open the door for more choice for your credit needs but will also give you better terms like lower interest rates and no fees.

Your credit score is calculated by taking into account many aspects of your credit history. The exact formula differs between the major credit reporting agencies however the list below is a good guide to why your credit score is low and how to improve it.

Many items that affect your credit score can be fixed easily as soon as 30 days but many may take as long as 6 and even 7 years depending on where you leave.

In this article, we will cover the most common items that affect your credit score.  Knowing how the credit scoring formulas work will help you to improve your credit score and keep it high.


1. Credit Inquiries

Too many credit inquiries can lower your credit. On average each credit inquiry will cost you 2 points of your credit score. Credit inquiries that affect your score last approximately 2 years. When looking at your credit buro report, there could be inquiries older than two years, however, they do not affect your credit score.

2. Over your limit on credit cards and loans

Your credit score will go down 10-20 points for each account that is over the limit. The good news is that this stays on your credit record only and until your balance is over the limit. Paying the difference will increase your score the next time the bank or the loan holder reports your status. Usually once per month.

3. Late Payments

Late Payments can cost you 30 points and more depending on how late you are. Bank can report 30, 60, 90, 120 days and over. Each report will lower significantly your credit score. The good news is that once you are back on track, your score will start to gradually increase

4. High Balances

High balances on your credit cards and loans can have a big impact on your credit score. Individual credit card with high balance can lower as much as 30 points your credit score. High overall balance among all your credit accounts can lower it by 100 points and more. Ideally, you should keep your debt to credit ratio at 30% and your credit cards at below %30.

5. Too Much Credit

Too much credit availability, even though not utilized, can lower your credit score. Ask your lenders to lower your limits or cancel the newest credit cards.

6. Too Little Credit

Having one credit card on file, even though in good standing will not give you a high credit score. Lenders like to see a wide range of credit accounts. Please see point 8. Diversity below.

7. Short Credit History

Lenders like to see long term relationship with your creditors. This affects not only young people but also people that like to change their banks and credit cards often.

8. Diversity

Lenders like to see a wide range of credit accounts. Having a credit card, personal loan and car lease will give you a much higher score than having 3 credit cards.

9. Collections

A collection is probably the worst item you can have on your credit report. Second only after bankruptcy. A single collection may lower your credit score by as much as 50 points and if combined with a write-off account from a creditor can go as high as 100 points.

10. Public Records

Public records are items on your file that can affect your credit score negatively. Although most of them like secured loans are non-derogatory, they do lower your credit score unless discharged. Other items like court orders can significantly lower it.

This is by no means a complete list of items that affect your credit rating but is a good list to keep in mind. This will help you to manage your credit planning and allow you to create a plan to increase your score and keep it high. A high credit score is not only good when you need credit but will save you money by allowing you to negotiate better terms with your lenders for existing and future debt.

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