No matter how hard you try, you can't improve your credit score. Who's to blame? Identity thieves? President Trump? Space aliens? It's time to find out.
Start by reviewing your credit report, which is a compilation of your credit history. Creditors report activity on all of your loans and credit accounts, such as history of payments and outstanding balances, to the three major credit reporting agencies (Experian, Equifax, and TransUnion). Each reporting agency adds this information to their version of your report.
Your credit report includes your personal information, certain negative financial information that's a public record (such as a civil judgment against you), delinquent or unpaid accounts that have gone to collections, the record of past accounts, the status of current installment loans and revolving (credit card) accounts, and requests for your credit history.
Your credit score is derived directly from the information in these credit reports, using one of several different scoring formulas. For the main scoring systems, there are five primary factors that affect your score.
- Payment history is one of the main factors that make up your credit score. Late payments and delinquencies drop your score significantly.
- Credit utilization, the amount of credit you use compared to your credit limit, accounts for another significant portion of your credit score. The closer you are to maxing out your cards, the more risk lenders see in giving you more credit. Your score will drop as a result.
- The age of your accounts and the length of time since each account was last used are important. If you have accounts that you've used regularly for years and maintained them well, your score will increase.
- New credit applications and the mix of credit types that you have also contribute to your credit score. Asking for multiple new credit accounts will drop your score, while showing that you can handle both revolving accounts and installment loans responsibly will raise your score.
Review your entire credit report for errors. Do you see accounts you've never opened, or fraudulent charges on existing accounts? Identity thieves are likely to blame – although you should verify the personal information. A creditor may have attributed someone else's information to you.
Look over individual payment histories for missing or late payments. Is the information correct? A creditor may have incorrectly marked a payment as late, dropping your score.
Are there multiple requests for credit that you didn't make? Even if the accounts weren't opened, the requests will cause a temporary drop in your score.
Did you loan your credit card out to others, or co-sign for someone else's credit? That account activity will show up on your credit account, making you indirectly responsible if your accounts (or ones you've vouched for) are abused.
If thieves, creditors, or authorized users aren't to blame, guess what? You're probably the reason for your low score. Look over the five factors listed above and compare your credit report to the score factors to find the most likely thing you're doing wrong.
One thing is for sure – you'll never figure out who is keeping your credit score down if you don't pay attention to it. Keep a regular check on your credit reports, take advantage of all fraud alerts, and credit monitoring features offered by your card issuer. If you can't devote the time and energy to monitoring your credit yourself, let MoneyTips protect your credit and your identity with a free trial.
It shouldn't take long to find out who's responsible. Don't be shocked if it turns out to be someone you see in the bathroom mirror every morning.
You can check your credit score and read your credit report for free within minutes by joining MoneyTips.