Can You Do All the Right Things and Still Have a Low Credit Score?

Can You Do All the Right Things and Still Have a Low Credit Score?
David Andrew
By: David Andrew
Posted: June 25, 2013
Experts share their tips and advice daily on, helping subprime consumers navigate the world of personal finance.

So you’ve been doing everything right for your credit score: You keep your card balances low, don’t open new accounts often and never miss your monthly payments.

However, when you check your credit score, it turns out to be quite a lot lower than you expected. What’s going on?

There are actually a few other moves that can hurt your score many people don’t think of. This could be why your score isn’t great even though you seem to be doing everything right.

1. Closing an old or unused card.

If you’ve stopped using an old credit card, it might seem like a good idea to shut it down. After all, it’s nothing but a liability. Isn’t it?

If you’ve done this in the past, it likely hurt your score. The rating agencies partially base your score on the age of your credit history. Your oldest accounts make your report look better, even if you rarely use these cards.

That’s why you shouldn’t shut down unused cards in the future. Just store them in a safe place.

2. Taking financing from a store.

As an extra sales incentive, many stores offer financing deals. This could be something like buying a sofa and not owing interest for the first six months.

This financing counts as a line of credit and shows up on your credit report. This can be a problem for a couple reasons.

First, the store will call up your credit report so the inquiry will hurt your score. In addition, they’ll likely give you only as much credit as your purchase so a nearly maxed-out loan is going to show up on your report.

“If you keep going with good credit

habits, soon you’ll have a great score.”

3. Misreporting of a no-limit credit card.

If you’re using a no-limit credit card, it could also be creating problems for your score.

Credit card companies need to report a limit on your account to the rating agencies. Some companies record your card as having a very high limit, which is good for your score.

Others report your limit as your average monthly spending. This is a problem because it shows up like you’re maxing out your account each month.

If you see this issue on your credit report, call your credit card company and ask them to stop reporting your average spending as the credit limit.

4. Give it more time.

It takes time to fix a bad credit score. If you’ve missed payments in the past, used to carry too much debt or had to declare bankruptcy, you won’t be able to fix this damage overnight.

Keep patient, though. If you keep going with good credit habits, soon you’ll have a great score.

While all these issues bring down your score a little bit, they aren’t nearly as bad as missing payments or maxing out your card limits.

If you’re doing everything right, avoid these other mistakes and your score will eventually improve.

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