It can be highly frustrating to see that your credit score hasn’t increased. Luckily, there may be a number of logical and adjustable reasons why your credit score isn’t increasing.
Your credit score may become stuck for a number of reasons, such as a limited credit history and high credit balances. Read on to discover why your credit score may be frozen and read this Lexington Law Firm Review for further information about amending your credit score.
1. You Have Missed Payments
Your record of making late payments to credit card issuers is the number one factor in calculating your overall credit score. Thus, your payment history makes up 35% of your overall FICO score. This is the score that is used by 90% of lenders when determining whether or not to issue you a line of credit.
While your lender may consider a payment to be late if it is one day past its due date, a late payment does not get reported by the bureau until it is over 30 days past its due date. However, having a single late payment on your report can lead to a significant drop in your overall FICO score.
A single late payment will typically remain on your credit report for 7 years. However, the impact on your score will become far less severe over a period of time. You should ensure that you are consistently making on-time payments in order to improve your credit score thereafter.
2. Your Debt Balances Are High
The amount that you owe on your debt accounts (including credit cards and loans) is one of the most significant factors that impact your overall credit score. Loans that you are close to paying off will have a more positive contribution to your overall score when compared to balances that you have just started to pay.
More specifically, credit card balances will impact your credit utilisation ratio, which is defined as the amount of revolving credit you have divided by your overall credit limit. As the balance on your credit cards increase, so does the overall risk that you present to any lender. For this reason, it is highly recommended that your credit utilisation rate is kept as low as possible. This means that your total limit for all accounts shouldn’t be above 30%.
3. You Have A Limited Credit History
A limited history is another reason why your score may not be increasing. The data that works out the length of your credit history includes the age of your oldest account, the average age of your accounts, and the amount of time since you last opened a credit account.
Having a longer credit history is usually a positive for your score. Thus, having a more limited history will prevent your overall score from rising.
In order to improve your credit history, it may be a case of waiting until you have a longer history. You may also be able to speed things up by naming yourself as an authorized user on another family member’s card.
This is because, whenever you are an authorized user, you reap the rewards of another primary cardholder’s credit history. You can also use this credit card to make purchases.
If the person who is listed as the primary cardholder makes consistent on-time payments and maintains a low credit balance, your score could drastically improve. You should bear in mind that the issuer of the card needs to report you as an authorized user to the relevant credit reporting companies for this to happen.
4. You Have Submitted Too Many Applications For Credit
Whenever you apply for a new one of credit, your lender will check your credit reports. This is known as a hard inquiry. Accumulating hard inquiries by routinely applying for a credit card might have a significantly negative impact on your credit score.
This is because an influx of recent hard inquiries appearing on your credit report can make you a ‘red flag’ for lenders and creditors. Having numerous hard inquiries over a short period of time should be a deciding factor in preventing your FICO score from rising.
Thus, to elevate your credit score, you need to keep your number of inquiries to a minimum. These hard inquiries can also stay on your report for two years. However, the impact on your overall score will decrease over a period of time.
5. You Only Have One Kind of Credit Account
The variety and diversity of your installment and revolving credit accounts has a 10% impact on your overall credit score. An installment credit account is defined as a loan that you make fixed payments towards over a specific period of time. These loans include auto loans, personal loans, student loans, and mortgages.
In contrast, a revolving credit account requires monthly payments. However, these can be borrowed from and re-paid frequently. The minimum payment on any credit account can also fluctuate depending on your overall balance.
Thus, having a variety of different accounts shows potential lenders that you are able to manage numerous types of debt. Enhancing your credit mix will inherently raise your credit score. However, you should avoid taking on new forms of debt just to improve your score.
Conclusion
To conclude, this article has outlined the five main reasons why your credit score isn’t increasing. I hope that you have found this article to be insightful and informative. Thank you for reading.
