Finding out why your credit score is low is easy. However, fixing it may not be so easy. Sometimes it can take months, even years, to repair your credit. Either way, once you realize you have a low credit score you should begin working on it immediately. First, check your credit score. There are several online sites from which you can get your FICA score and see a full print out of your credit report. If your credit score is low there are certain things you need to do in order to get it back into good credit range. First you should understand how your credit score works.
There are several things that determine your credit score. Unpaid debts, late payments, too many accounts and other things are all factored in to your credit score and can cause your to lose points. As these factors add up, they are taking points away from your credit score. In return, you end up with bad credit which leaves you with high interest rates, loan refusals and other unfortunate events.
Unpaid Debt
Everyone knows that unpaid debt counts against you on your credit score. Not only does it take several points from your score, it shows creditors that you are unable to pay your debts such as loans, bills or other obligation. This is a big red flag for lenders and makes you a high risk customer and tells them that you may not be able to pay the debt back to them. Whether it’s an old phone bill or a medical bill, try to pay it back. Even $10 a month will help. It shows that you are at least attempting to pay the debt back. Always try to work something out before it goes to your credit. If you know that you have an outstanding phone bill start sending $10 or $20 every month. As long as it hasn’t went to collections, they will continue to hold it until you pay it off. While it may be late, at least it won’t be an unpaid debt on your credit.
Late Payments
Yes, late payments can dramatically reduce your FICA Score. Each and every loan, account, or hit on your credit has a late payment section. It shows every time each account has been past due in increments of 30, 60, 90 and 120 days. Each late payment take points from your score and shows creditors how well you pay your bills. If a creditor looks at your FICA score and credit report and sees that you have 6 open accounts, they can look to see how often you are late. If they see that you are late on a regular basis they may assume that you have to much debt to handle. Where as if they see you have all your accounts in good standing and have not been 30 days late that will help to show them that you are a great customer who pays on time.
Multiple Accounts
Multiple accounts also affect your credit score. To many open accounts can cause your credit to drop because the more accounts you have open, the more debt you have. Revolving accounts such as credit cards and department store accounts can take points off your credit even if you balance is zero dollars. While zero dollars is better then a maxed account, it is still considered debt potential and creditors see the possibility of you maxing out those accounts and having higher bills. Therefore, any time you have an account that is fully paid, you should always close it out. This will help to raise your score. If for any reason you ever want to open the account back up, you should not have even problems since you paid it promptly before.
Over time, these three things can make, or break, your credit. Always be sure to pay your accounts on time until they are fully paid off. Also, close out any unnecessary accounts, as you can always open them in the future if they are needed. Insuring that these things are done and your credit score is in good condition you will save yourself hundreds and even thousands of dollars over the years with lower interest rates, better deals and less refusals.