You’ve been paying your bills, trying to increase your credit score. You’ve been on time and even paying more than your minimum payment, but you score keeps dropping. These are some of the reasons why your credit keeps taking hits, even when you are trying to raise it:
1 – Types of Credit and Length of Credit History
As you begin to pay off some of your loans, both your types of credit and your credit history goes down. Because these are both factors which help your credit score, they may lend to its decrease. This kind of decrease is especially common when people pay off their car loans or mortgages because they are years-long loans which have leant to your credit history that are no longer there.
2 – Percentage of Credit Used
If you are on time with your payments or even if you pay off your entire balance every month, your credit score will still drop if you are using a large percentage of your available credit. That means that if you spend $9,000 on a $10,000 line of credit one month and pay it off before the month closes, the credit bureaus still see you using 90% of your available credit, which reflects poorly on your score.
3 – Credit Inquiries
Typically these are only performed when you are opening a new line of credit, and they should only drop your score a couple of points. However, if you are opening several accounts which all make hard credit inquiries, this could drop your credit score substantially.
4 – Number of Accounts
If you have one loan that you just paid off, your number of open accounts doesn’t look too promising to lenders. Similarly, if you have several accounts that you close at once, this could also be interpreted as you don’t have the resources to keep these accounts open. On the other hand, if you open several accounts at once, you could raise a red flag, as lenders will interpret this as you attempting to open credit lines because you don’t have the funds to pay bills, and you are relying solely on credit. Good credit is a careful balance between having a good number of open accounts and proving that you are stable financially. It is a good practice to consult with a credit counselor if you are looking to close or open several credit lines or sign several loans at once.
5 – A Previous Black Mark
If you have a serious mark against your credit from your past, it may be difficult to overcome. Especially if your credit history is not very long or you are finishing paying a loan that you were on-time and consistent with, lenders don’t have much else to go off of. If you are struggling to overcome a derogatory mark such as bankruptcy, the best way to rebuild your credit score is to hire the professionals at Empowerment Financial Group.
For years, we have specialized in credit repair. If you are looking to fix or raise your credit score, our experts will work with you on a personal level, giving you the kind of attention you deserve at a price you can really afford. We are in the business of empowerment, and everything we do is to get you back on your feet. Contact us today to schedule your credit consultation, and see how we can help you rebuild your credit score.