Is Your Credit Score Lower than You Thought?

Low Credit Score

Have you ever been in a situation where you’ve had an embarrassing reality check as a result of your credit score? Maybe it’s happened when you’ve been negotiating a loan for the car of your dreams, and the credit manager tells you you’ll be paying sky-high interest rates. Or perhaps you’ve been unexpectedly turned down when applying for a new apartment.

A bad credit score can wreak havoc in your life, especially if you’re one of the many Americans who don’t keep close tabs on their credit reports. Your credit score might have been high enough to get you in the door and open new accounts, but a number of issues can trigger a substantial drop. Even a small decrease in your score can have a significant impact on your financial opportunities by dropping you down to the next credit bracket. For example, if you move from an excellent credit score to a good score, or from a good score to a poor credit score, your options for lower interest rates will decrease accordingly.

Stretched Too Thin

A major contributor to decreased credit is that all-too-familiar reality of being maxed out on your available credit. Sure, you’re making the minimum payments and you certainly hope to make a bigger dent in the balance — maybe when you get a better job, or you figure out how to pay less rent — but for now, you’ve hit your limits, on all of your cards.

The three credit bureaus that monitor and report your credit activities call this your credit utilization ratio, and if you’ve hit your limits on all your cards, you are definitely in the utilization danger zone.

Ideally, you should only use about 30 percent of your available credit across all cards and other credit sources. Otherwise, the bureaus will consider your behavior a potential liability and your score will drop accordingly.

Too Much Credit Activity

Are you a consumer who just has to have the new card you’ve seen advertised on TV? Or do you apply for every offer you get in the mail promising you quadruple points or cash back? Have you made a habit of saying “yes” when a department store clerk offers you an application for a store card that will save you 15 percent on your purchase just for applying?

If so, all of those applications will unfortunately trigger further alarms because multiple inquiries into your credit can have a negative impact on your score. The more inquiries, the more potential damage, as they show up on your report.

The best advice in these situations is to better manage the credit resources you have rather than constantly applying for more credit. Keeping your balances low and your available credit high can produce nearly immediate increases to your credit score.

Likewise, living within your means and sticking to a card that you already own might convince a bank or a card company to offer you a limit increase. This will come in handy when you really do need additional funds for a trip, a family emergency, or other important reasons.

Wondering how you can fix your credit? We can help, with an array of professional resources designed to assist you. can help you better understand and improve your credit score. We’ll also show you how to keep a closer eye on issues that can impact your credit in the future.

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Posted in Credit Score
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