Having credit scores stuck in a lower range is frustrating, especially if you’ve been working hard to raise them. Boosting bad credit scores (under 650) to the fair credit score range (around 700) requires lots of hard work and patience. However, with the right plan and enough time, it is absolutely possible to turn your bad credit scores into great credit scores, as long as you’re realistic.
Credit scores tend to take the path of least resistance. For example, it’s much easier to move from 580 to 640 than it is to move from 780 to 810. Of course, just because it’s more difficult to move to the highest levels doesn’t mean that it’s impossible. Here are 3 common reasons why your good credit scores aren’t great, yet:
1. Derogatory Information
Over 1/3 of your FICO and VantageScore credit score points come from the “Payment History” category of information from your credit reports. When calculating your scores, scoring models will look for any derogatory information. For example, a scoring model’s software might look to see if there are any collection accounts present. If not, you would be awarded the full credit score points allotted for that question. If a collection were present, then you would be awarded a lower number or points, or perhaps even no points at all.
When it comes to derogatory information damaging your credit scores, time is your ally. Thanks to the Fair Credit Reporting Act, derogatory information is not allowed to remain on your credit reports forever. In most cases derogatory information only has a shelf life of 7-10 years. After that, most derogatory items must be purged from your credit reports, forever. As times goes on the impact of derogatory information will subside. As a result, a series of late payments that occurred 5 years ago will not hurt your scores nearly as much as they did when they were brand new.
2. Credit Card Debt
Many people fail to understand the impact of credit card debt on their scores. The “Amounts Owed” section of your credit reports is responsible for 30% of your scores. This category includes the balances on your credit card accounts, and what percentage of your total available credit you are using. This relationship is known as your revolving utilization ratio, or debt utilization ratio. If you have $10,000 of available credit and your balance is $5,000 then your ratio would be 50%.
High credit card balances equal high utilization ratios, which cause lower credit scores. Paying down your credit card debt and keeping it paid down is the most effective way to see a credit score boost in a relatively short period of time. The good news about this category is that it’s actionable, unlike the payment history category. You can turn a good score into a great score in less than 30 days if you’re willing to dump your credit card debt.
3. Applying for Credit Too Often
Another reason why your credit scores might be stuck could be that you are applying for new credit too often. Credit scores consider the number of inquiries you have on your credit reports. Hard inquiries (which occur when a lender obtains of copy of your credit reports as part of an application for credit), can negatively impact your credit scores. If you’re constantly applying for credit then you’re constantly causing new inquiries to appear on your credit reports, and that’s yet another reason why your scores seem to be stuck.
Hi,
I read everything you send me and I had very low credit scores when I started, a couple years ago. I’ve done everything, I am able to do that you have suggested. I applied to remove my IRS Tax Liens. I obtained 4 Credit cards with $300 and $500 limits. I set up a payment plan on my collection accounts. I hooked up with Lexington Law, reluctantly. In less than a year, those credit card limits have gone up to $750, $1,000 and $2,300. The IRS Tax Liens are gone. My Credit Scores have shot up and over 700. This week I had a big shock when, I got approved for a new car loan. And the Car Salesperson didn’t know what to do when they said I was approved, at the first place they tried as I sit there speechless, with tears running done my face. I am now driving my most favorite car. A New Mercedes Benz and Mercedes Benz financed me at 2.99%. All I can say is Thank you so much.
hnks foryour help.