Even if you don’t plan on buying a home or car anytime soon, it’s still a good idea to do what you can to improve your credit score. That way, if there’s ever a financial emergency or if you need guaranteed and immediate approval for a loan, you don’t have as many hoops to jump through. But what happens when you do your best to improve your credit score and it remains stagnant? There are several reasons why this may happen.
There’s Not Enough New Information on Your Credit Score
Just as employers may not consider applicants for a job position because they don’t fit the requirements, the same applies to getting a higher credit score. What that means is that you likely won’t see an improvement to your credit score if you don’t have the right information that qualifies you for a higher score. You may make regular payments on your accounts, but doing so doesn’t necessarily shift how much of a risk credit card companies deem you to be.
Something else to bear in mind is that there’re a lot of factors at play when it comes to determining your credit score. For instance, while you may miss a credit card payment, it may not lower your score if you have a great credit history. On the other hand, that’s not likely to apply for those who miss payments and have a lousy credit history. Say that you have a less-than-stellar credit history and you make a single on-time payment. That may not be enough to bump your score up. Yet.
Not Enough Time Has Passed
Going back on the last example touched on above, raising your credit score takes time. That means that you can’t expect to see improvement every month, even if you feel you’re doing everything right. Lenders play the credit game for the long term, which means that they reward consumers who do the same when it comes to reducing their overall level of risk. Rather than being a responsible consumer for a single payment period, show that you consistently make good financial decisions month after month. While you may not see your credit score improve very often, that doesn’t mean that you aren’t taking steps in the right direction. Remember that your good decisions all add up in the end.
There’s a Mistake on Your Credit Report
If you aren’t closely monitoring your credit, then you may not be fully aware that you have negative items on your credit report. If you had a recent default, foreclosure, or bankruptcy, that could become a major impediment to improving your credit score. Even without such a negative event taking place, there could still be outdated or outright false information on your credit report that’s holding you back. Take out some time to sit down and carefully look over your credit report for inaccuracies. If you spot any, take steps to get them cleared up ASAP. Once you do, you may have an easier time of boosting your score.
You Don’t Have Enough Diversity on Your Credit History
There’s nothing wrong with playing it safe when it comes to your credit. After all, the fewer credit card and loan accounts you have, the fewer chances you have of making a blunder that can harm your credit score. That said, playing it too safe can sometimes hold you back.
There are different types of credit:
- Revolving credit accounts, such as home equity lines of credit and standard credit cards
- Installment accounts, which include home loans, car loans, personal loans, and student loans
- Open accounts, such as internet bills, electricity bills, and utility bills
If you do not have much diversity on your credit report, you don’t have to go out of your way to add different types of credit. Instead, reach out to your utilities or internet provider to see if they can report your payments to a credit bureau if they don’t already. Do you do a lot of driving? If so, you can apply for a gas card, which can save you money on fuel. Not only can a gas card diversify your credit, as long as you pay off your balance in full every month, using it can also be more secure if you pay at the pump.
You Closed an Account Recently
It feels great to pay off a credit card, but don’t be too hasty when it comes to closing that account. Going back to the fact that lenders like to think long term, having a lengthy (and responsible) credit history works in your favour. While you may not plan on using a card or the account it’s attached to ever again, you can most certainly use the positive mark that a paid-off account brings to your credit report.
Additionally, leaving a closed account on your report helps with your credit utilization rate. This rate is determined by how much credit you have between all of your open credit cards and how much credit you’re currently using. By closing a paid-off account, you increase your total credit utilization rate, which harms your overall credit score. Deciding to leave the account open helps your credit score over time.
Someone Stole Your Identity
A final reason that your credit score may not improve is that your attempts to increase it may be counteracted by someone else attempt to destroy it. Rather than opening fraudulent accounts and making massive purchases that a person quickly notices, online criminals may steal a person’s identity and make small purchases here and there that go unnoticed until the victim takes a close look at her or his credit report. Should you find yourself a victim of identity theft, you may not realize that you’re playing a game of tug of war, with your credit score as the prize. Keep in mind that credit card theft is the most prevalent type of identity theft, so it’s smart to learn about the most common warning signs.
Get into the regular habit of looking over your credit report at least once a month for fraudulent charges and accounts. It’s best to spot and act on identity theft as soon as possible to reduce the overall financial fallout and any headache you’re sure to experience.
While it’s undoubtedly true that it can take time to improve your credit score, it’s worth it. Put the above tips to good use and see how they work.