You’ve noticed that the credit score listed on your credit report is much lower than you anticipated. You’re absolutely shocked. How could this have happened? These are some potential reasons why your credit score is lower than expected.
Late Payments
Do you have a bad habit of paying your bills late? Well, this can have a significant effect on your credit score. Creditors will report your late payments to credit bureaus (the bureaus who create credit reports and calculate your credit score) after a certain period of time.
Many will wait until the payment is 90 days past due, but some will do it after only 30 days past the due date. If you have missed due dates consistently, you’re bound to do some damage to your credit score.
What Can You Do Now?
Make a commitment to paying your bills on time. If you struggle with remembering deadlines, try to set up autopayments with your creditors so that the money is automatically transferred on the bill’s due date. When it comes to credit card bills, you can also make minimum payments when your budget is tight.
Covering this small amount will help you avoid a late payment penalty, and eventually, a late payment report to a credit bureau.
High Credit Utilization Ratio
Your credit utilization ratio is how much of your available credit is in use (how much has yet to be paid back). The higher your outstanding balances are on various credit accounts, the higher your ratio will be. This could have a negative impact on your credit score.
What Can You Do Now?
Work harder on paying down outstanding balances. For instance, say that you applied for a line of credit loan to handle an emergency expense because you didn’t have enough savings to cover it all. You did this because you knew the online provider could process the application quickly and inform you about your approval status. Soon after submitting your application, you received an approved line of credit and made a withdrawal within your credit limit to resolve your emergency expense.
That line of credit loan now has an outstanding balance that is contributing to your credit utilization ratio. To get your ratio down, you’re going to have to dedicate more energy to repaying the loan. Assess your personal budget to make sure that you can afford to follow the monthly payment plan — and potentially, make more payments to finish the plan even faster.
You should do the same for any credit card debt that you’re carrying, especially if you’re carrying that debt on multiple cards.
Credit Report Errors
While looking through your credit report, you noticed some mistakes, like accounts that you have never opened. Sometimes, credit bureaus mistakenly add accounts of people that have similar names or addresses to reports. This could negatively impact your credit score, and it’s not your fault!
What Can You Do Now?
Whenever you notice a credit report mistake, you should dispute the error with the credit bureau. Provide as much proof as you can that the information listed is false. The bureau should address the problem and remove the error from your report, restoring your score to what it’s supposed to be.
Financial Fraud
Credit report errors could be a sign of a bigger problem. Maybe the credit bureau didn’t accidentally assign another consumer’s information to your report. Maybe your report is revealing that you’ve been the victim of identity theft and financial fraud for some time, and you didn’t realize it.
Someone has used your personal information to access your current credit accounts or even open new credit accounts in your name in order to spend without consequence. Obviously, this can do a lot of damage to your credit score.
What Can You Do Now?
If you think you’re facing a case of fraud, you will need to take action right away. Report the fraud to the creditors associated with the fraudulent accounts (for example, a credit card issuer). Report the fraud to various credit bureaus. And report the incident to the Federal Trade Commission. After that, you can also inform the local police department about the crime.
Now you know what problems could be making your credit score so much lower than you expected, and now you know how you can fix them! So, it’s time to take action and get your score back up.
