7 Surprising Reasons Your Credit Score Isn't Higher

July 18, 2012 2 Comments »

why isnt my credit score higherThe average U.S. credit score is 693. However, it’s possible for credit scores to reach 800 or higher. When’s the last time you checked your credit score? If you haven’t recently, you’re not alone. According to a Consumer Action study, 27 percent of Americans have never checked their credit.

But, here’s the thing. Even consumers, who are diligent about checking their credit, have an opportunity to boost their scores. Read on to discover a few surprising reasons your score isn’t higher.

Credit Diversity Issues

Consumers with a mix of fixed and revolving credit earn higher scores. So, what does this mean for you? You need both fixed loans (like a car payment or a mortgage) AND revolving credit (like a credit card or home equity line of credit). Look at your credit, for opportunities to diversify.

Credit Utilization is too High

Using more than 30 percent of your revolving credit adversely affects your score. Think about it like this. Let’s say, you have a $10,000 credit limit, with a $2,000 balance. You’re only using 20 percent of your total available credit – so, you’re in good shape.

But, once your balance reaches $3,000 or higher, your credit ratio takes a beating.

New Credit Inquires

Are you shopping for a new mortgage? If so, don’t allow lenders to go crazy pulling your credit report. The pursuit of large amounts of credit, in a short period of time, affects your credit by as much as 10 percent. Ask the first lender to give you a copy of your report. Then, provide copies of this report to other lenders.

Eventually, the lender you select needs to pull an original credit report. But, with this strategy, you’ll have fewer total inquires.

Credit Report Inaccuracies

You’re entitled to a FREE credit report every 12 months, through AnnualCreditReport.com. This organization is set up by the major credit bureaus, including: Experian, Equifax and TransUnion. Review your report for errors, and report inaccuracies right away.

Credit Phobia

Imagine this. You pay for everything in cash, dread debt, and avoid opening new accounts like the plaque. Good strategy, right? Wrong. Adding more credit, when done correctly, boosts your credit score. Open new accounts, pay off your balances and watch your credit score grow!

Closing Accounts

You just paid off a hefty credit card bill. Congratulations! But, before you close the account – think again. A credit card with a zero balance can increase your credit score. It says to the credit bureaus, “this person knows how to use credit responsibly.”

As a result, your credit score increases. So, unless you have a big annual fee, consider leaving paid off revolving credit open, and monitor activity through your credit report.

Maxing Out, and Paying Back

Let’s say your credit card has a $2,000 credit limit. Each month, you max out your credit card to earn credit card loyalty points – but always pay the balance back in full. This pattern can adversely affect your credit ratio. Instead of a credit ratio of 30 percent or lower, which helps your credit score, you’re at 100 percent monthly (even if you are paying it back).

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  • Jennifer McNabb

    Very detailed post!

    I really don’t like the way credit card issuers work against your credit score.

    Their incentives are set so that when you max out your card every month (even though you’re paying it off monthly) you earn the most rewards points, however, this also has a adverse affect on your overall credit score. Seems like these two elements (credit score and rewards points) should be moving in tandem not against one another.

    My guess, is that, although you pointed it out in this post, most people don’t realize this is hurting your score. Its general intuition to think that you’re building your score when you pay off your bills on time each month (even if you’ve hit your credit limit), not hurting it.

  • http://ohheyworld.com Drew Meyers

    I think you should check my credit score for me and report back. It’s been a few years since I’ve looked…whenever I do get around to checking it again, I expect it to be above 800.