Seven Possible Reasons That Your Credit Score Is Failing To Improve
1. You Lack Diversity In Your Lines Of Credit
Consider this example: You don’t have a car loan or a mortgage, but you have five different credit cards. Each month, you pay your credit cards in a timely manner. However, your accounts are seen as unbalanced by the various credit scoring models. It is the ability to handle multiple types of debt simultaneously that lenders look at when considering whether or not to extend a new loan to a consumer. Spot what’s missing by reviewing your accounts. Your score will rise when you fill in this gap.
2. Your Credit Report Doesn’t Turn Up Any Old Accounts
If you opened a credit card many years ago, it may be more valuable than you realize. Even if it doesn’t come with many perks, old accounts have value in other ways. Half of your credit score takes into account the length of your credit plus your long-term payment history. You can’t afford NOT to use your old credit card even if it doesn’t deliver any of those enticing traveling miles. By consistently using your oldest accounts, your credit score can be rejuvenated.
3. The “Other” Ratio Is Neglected
If you neglect your debt-to-income ratio and concentrate exclusively on using your available credit, your ability to gain new credit will suffer. While credit scores are not directly affected by this ratio, banks and other lenders are less likely to extend credit when the ratio is high. Lenders are less likely to deal with you because they see you as a higher risk when your debt-to-income ratio rises above 50%. In fact, you can sustain significant damage to your credit when you max out this ratio because you are spending more than you make.
4. Old Spending Patterns Rear Their Head
Most people make New Year’s resolutions that are completely forgotten by February. If you’ve resolved to manage your money better, don’t be surprised if you backslide. You must actively make changes to prevent yourself from spending too much on a regular basis and damaging your credit in the process. Start by cutting your monthly expenditures by 10%. By succeeding with a small goal, you will be better equipped to tackle future financial endeavors.
5. Small Expenses Are Paid For With Credit
Have you ever gone to the grocery store to pick up a basic item and paid for it with a credit card? If you have, this is the first place to begin repairing your credit. Using credit for these types of purchases is risky. If you are paying for small items on a single credit card, your ability to pay off your credit cards becomes less likely over time because you are unable to effectively track your spending.
6. You Fail To Save Money On A Regular Basis
When it comes to credit scores, an indirect role is played by your savings. The amount of money you have in your savings account is not considered by the credit bureaus. However, they are highly interested in whether or not you maintain a credit utilization ratio that is healthy and if you can reliably pay your bills each month. If you don’t have a stash of cash in reserve, you are more likely to use up your credit when an emergency arises. You must learn how to keep your balances manageable by planning for the unexpected.
7. You Operate With An Out-Dated Perspective In Terms Of Credit
Repairing your credit is not a simple thing. Understanding how to become worthy of credit can take years and an in-depth understanding of financial stability. To help you set new goals for the New Year, learn more at our blog or contact one of our professionals. You’ll discover a new way to look at your old credit report and learn how to make improvements.