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So you feel like you’ve been doing all the right things for your credit, but you are scratching your head, wondering why is my credit score not going up? But sometimes, even though you think you are making good financial decisions, you might actually be working against your credit score. Here is everything you need to know to help you improve your credit score, repair your credit, and protect your credit history.
Highlights & Key Takeaways
- If your credit score isn’t changing, you might have too much available credit, you have missed a payment, or you simply haven’t built enough credit history yet
- It takes 30 to 45 days for your credit score to change after an activity
- The best thing you can do to help your credit score is to pay your bills on time every month and keep your credit card utilization under 30%
- Check your credit score often and check your credit report at least once per year - if you find an inaccuracy, file a dispute with the applicable credit bureau(s)
12 Reasons Why Your Credit Score Isn’t Increasing
Let’s dive into why your credit score is stagnant and not increasing to the good or excellent credit score you desire.
1. You’re Using Too Much Available Credit
Yes, it is possible to use too much available credit. Just because you have a $10,000 credit limit on your credit card, doesn’t mean you should max it out. In fact, creditors watch something we call utilization. And the sweet spot is to have a balance of no more than 30% of your available credit limit. So if your balance is too high, this could be hurting your score, coincidentally to the tune of 30% of your credit score.
2. You’ve missed one or more payments
The worst thing you can do when it comes to improving your credit score is miss a payment. Not only does your payment history reflect 35% of your total credit score, but one single missed payment could cause a ding of up to 180 points. That’s a lot of points on a credit scale of 300 to 850.
3. You have a short credit history
Your credit history reflects another 15% of your credit score. And this factor can be frustrating to some, especially those new to credit and looking to establish an initial credit score. After all, it takes history to build history. But know that your credit score will benefit over time when you have responsibly used your credit. And know that while it takes about six months to see a credit score for the first time, it takes quite a bit longer to build a credit score.
4. You Frequently Apply for New Credit Cards
You might think that just because you have a good credit score, you can apply for a new credit card whenever you want. Every time you apply for a new credit card, it results in a hard credit inquiry which can impact your credit score by up to five points. And, the more credit cards you have, the more it hurts your overall credit mix, which can impact your score by up to 10%. So, before applying for that next credit card or retail credit card, consider how often you have been applying for new credit cards and if this is essential.
5. You Only Have One Type of Credit Account
Just like it can be bad for your to apply for too many new credit accounts, it can be just as harmful if you only have one type of credit account. Creditors like to see that you have a healthy mix of credit. For example, a healthy mix might consist of a mortgage or apartment lease, an auto loan, a student loan, and one or two credit cards. If you have only one of the above, the creditor cannot truly ascertain your creditworthiness or ability to take on more debt.
6. Your Credit Report Contains Inaccurate Information
Per the Credit Card Act of 2009, all consumers have free annual access to their credit reports. You can obtain a copy of your credit report through any of the three credit bureaus (Experian, Equifax, or TransUnion for free or through one of their subscription programs) or access it via annualcreditreport.com. You must take the time to review your report from time to time to check for inaccurate information.
The most common errors found on credit reports include:
- Incorrect address
- Incorrect or misspelled names
- Wrong middle initial or middle name
- Incorrect phone number
- You have mistakenly been reported as deceased
- You have been reported as being on the Department of the Treasury's Office of Foreign Asset Compliance List of Specially Designated Nationals, referred to as the terrorist watch list, the OFAC List, or the OFAC/SDN list
You must file a dispute if you find an error on your credit report. All three bureaus have programs available to help you file a dispute. Visit Experian, Equifax, or TransUnion for more information.
7. You’ve Been a Victim of Identity Theft
It's estimated that one-third of Americans have been the victim of identity theft at some point. Not only that, but nearly 300,000 Americans fall prey to criminals trying to scam them via phishing/vishing/smishing attacks each year. Identity theft crooks knowingly open new lines of credit or credit cards in your name and never pay the bills. This debt can accumulate with payments missed long before you know it is happening. And as a result, your credit score takes a nose dive. The staggering identity theft statistics are another reason you need to check your credit score often and review your credit report closely every year.
8. You Have Negative Events in Your Credit History
We all make mistakes, but some specific financial decisions and mistakes can significantly harm your credit score, not only keeping it from going up but driving it in the opposite direction. Bankruptcy, default judgments, foreclosure, collections, etc., can affect credit scores.
- A bankruptcy can stay on your credit report for seven or ten years; during that time, your credit score will not improve.
- While default judgments don't appear on your credit report or affect your credit score, they impact your ability to qualify for credit since lenders can still search for judgments via public records.
- A foreclosure will stay on your credit report for seven years, and similar to a bankruptcy, it can have long-lasting effects on your ability to improve your credit score and borrow too.
- Your account can go into collections if you fail to pay for at least 120 days and can remain on your credit report for up to seven years, signaling to creditors that you may not be creditworthy.
9. You Recently Closed a Credit Account
It might seem wise to close out a credit account, such as a personal loan for fair credit after you have paid it in full. But this is not necessarily the case. Closing out a credit card account lowers your available credit, which can increase your credit utilization ratio. And that can drop your credit score. Further, closing a credit card account you've had for a long time can also negatively impact the length of your credit history.
10. Your Credit Is Already Excellent
First, if you have an excellent credit score, congratulations! This is a big feat. Credit scores naturally go up and down a bit each month, even for those with excellent credit. And since a credit score of 800 or higher is considered excellent, and the scale only goes up to 850, it can be harder to close the gap the higher you get. You should know, too, that attaining an 850 credit score might seem like a worthy goal and one to go after; it's unrealistic to think your score will stay there forever.
11. Your Credit Score Hasn’t Been Updated Yet
Do you know the saying that a watched pot never boils? So don't expect your credit score to change overnight. Credit scores update about once each month based on when the creditors report on your most recent payment data. But this can vary depending on your unique financial circumstances. Remember that credit scores are based on the information in your credit reports. So, for the score to change, something needs to change in that credit report.
12. You Have Hard Credit Inquiries
Every time you apply for new credit, your score can decrease by up to five points. This might not seem like a lot, but if you apply for a new mortgage, a new credit card, and a new auto loan in a short period of time, it can send your credit score spiraling down by about 15 points. And hard credit inquiries stay on your credit report for as long as two years. So while you wait for that credit score to improve, keep making your payments on time and keeping that utilization under 30%. These are the two most essential factors in improving your credit score.
Why Does Your Credit Score Go Up, Down, or Stay the Same?
As consumers, we often want to understand why our credit score goes up or down or even why it seems to stay the same. To address this, it is crucial to understand what goes into calculating your credit score in the first place. There are five factors, and each represents a specific weight used in that calculation.
- Payment history, 35%
- Credit utilization, 30%
- Credit history (average age of accounts), 15%
- Credit mix, 10%
- New credit, 10%
As you can see, your payment history is the most critical factor in getting your credit score to go up. And as we said earlier, missing a payment can have your score plummeting by as much as 180 points.
How Long Does It Take for Your Credit Score to Change?
Your credit score can often change depending on when your creditors report recent activity to the credit bureaus. But generally, your score will go up or down (or even stay the same) every month. And not all creditors report back to the bureaus every 30 days. So don't assume you will see the impact of a hard credit check or a missed payment within a month. It could take 45 days or longer to see the result of recent credit activity.
Credit Score Not Going Up? Here’s How to Increase It
Even though it might take a while to see changes in your credit score, that doesn't mean you can't make efforts to get it to increase. Here are some of the best things you can do to improve your credit score and credit history.
- Work with a credit repair professional - Credit repair is when a third party attempts to get information removed from your credit reports in exchange for payment. The goal is to remove negative but accurate information from your credit report before it falls off.
- Negotiate with your creditors - If you are struggling to make the minimum monthly payment on your credit card or personal loan for good credit, the last thing you want to do is miss that payment. Instead, contact your lender to see how they can help. Your lender can lower your interest rate, create a repayment plan, help you with loan consolidation, or assist with debt forgiveness.
- Continue to pay your bills on time - We can't emphasize this one enough. The more you pay your account on time, the better it is for your credit score. And pay your credit card balances strategically. If you owe over 30% on one of your credit card balances, look to pay more than the minimum due whenever possible to help improve the utilization ratio. Of course, pay at least the minimum due on all your other debts each month too.
- Become an authorized user on someone else's account - If you are relatively new to the credit space and trying to build a credit history, repair your credit, or get it to increase a bit, then partnering with a trusted family member can help. Ask a family member to add you to their account. Just make sure that they practice responsible financial habits. Now, you can reap the benefit from their good behavior. And this is a great way to build credit without a credit card.
The Pros and Cons of Credit Counseling
If you are struggling with your debt or want to qualify for more than a personal loan for bad credit, then credit counseling can help. Credit counselors can help you get lower interest rates, prevent harassing calls from collections agencies, lower your monthly payment, get out of fees and penalties that have accrued on your account, and more.
However, working with a credit counselor can have a downside as well. Though working with a credit counselor or debt management company doesn't directly impact your credit, you will likely need to make a sizeable payment against your new debt management plan (DMP). So, be careful that you will be able to make that payment without falling behind on your other debts or bills too. Also, be aware that your accounts will be frozen while you are in the program, and you will likely not be able to apply for new credit.
The Difference Between Hard and Soft Credit Inquiries
Every time you apply for credit, the creditor will most likely conduct what is called a hard credit inquiry or a hard credit check. A hard inquiry appears on your credit report when the creditor accesses your credit report related to your application for credit. And while lenders can only access your credit report if they have a permissible purpose, you will see a hit of up to five points every time your credit is checked in this way.
A soft credit inquiry, on the other hand, appears on your credit report when a creditor or person requests limited information to make a promotional offer to you or check your credit as a screening process. A soft inquiry also occurs when you check your credit score. Soft inquiries do not impact your credit score.
Applying for Credit: When It Makes Sense and When It Doesn't
Sometimes, applying for new credit can help your credit score. Specifically, you might see a benefit to your credit score if you last opened up a new credit line some time ago or if you are balancing out your credit mix. You can even see a benefit if you open up a new credit card, and the new credit line helps positively impact your utilization.
However, you must be mindful when you consider applying for new credit. Only open up a new credit line if you can meet the minimum requirements. And don't look at that new credit line as permission to spend more money than you can afford to pay back each month. Finally, pay attention to that credit mix. If you already have several credit cards, consider if you need another, what perks and benefits you might receive, and if it is worth the risk to your credit.
Managing your credit takes perseverance and diligence. Watching that credit score sit at the same number month after month can be frustrating. Even more frustrating could be when you have good credit and are trying to push it into the excellent range to qualify for a personal loan for excellent credit. So if you are wondering why your credit score is not rising, know that the best advice we can provide is to stay the course. Continue to make your payments on time, pay attention to your utilization, and if you struggle to make ends meet and pay your bills, consider credit counseling for assistance.