Credit score is the key point of financial transactions. When this happens, ‘Why is my credit score low?’ It is not surprising that the question comes to mind. Your credit score is a 3-digit number that shows how responsible you are when making payments. And the credit score is generated by the information received by the credit reports. The reason why your credit score declines for this reason depends on the changes in your credit reports.
The credit score generally decreases significantly when a late or incomplete payment is made or no payment is made. Loan utilization rate is also important in decreasing credit score. These two factors are the most influential factors in the formation of credit score. If you encounter a lower credit score than you expect and ask yourself ‘Why is my credit score low?‘, this may be due to these two factors. But these are the first reasons that come to mind. There are other reasons why the credit score decreases.
Why is my credit score low and what are the factors that cause it?
If you paying regularly and your credit score is low, there are a number of factors that can cause this. These factors may be unimaginable reasons or unrecognized situations in credit reports. The reasons for your credit score falling may be;
- You have one or more credit cards;
Paying on time alone is not enough and the balance on each card should be considered. This may be the first reason you can find an answer to the question ‘Why is my credit score low?‘.
Credit usage rate is calculated both in general and per card. Although your overall usage rate is 30%, a card’s balance may be over 30%. For example; Suppose you have a relatively low limit on your credit card and assume that you use this limit to buy white goods. If you haven’t paid enough before next month, you’ll notice that your credit score has decreased. However, credit card issuers regularly report to one of three credit bureaus (Experian, Equifax and TransUnion) every month. Therefore, it is especially important that you deposit a certain amount of money before your due date. Or even if you have deposited even after your credit score has decreased, this decline will disappear in the following month.
- There’s a missed payment;
‘Why is my credit score low?‘ the second answer to the question; In the case of payments or payments made later than 30 days, your credit score may be significantly reduced. Because making full and timely payment constitutes 35% of the credit score.
It will take 7 years before this payment, hidden in your credit report, gets rid of the impact on your credit score. If you make regular payments during this period, your credit score will still be high after 7 years.
- Identity theft or a mixed credit file is dragging you down
‘Why is my credit score low?’ This may be the third answer to the question. If a criminal uses your credit card number or opens a new account, the account he or she has opened or the use of his or her credit card is included in your report.
If someone else has the same name, their credit account may get mixed up and appear in your credit report.
In both cases, it is necessary to discuss these reasons in the credit bureaus.
- Recently applied for a new loan
‘Why is my credit score low?‘ This may be the fourth answer to the question. If you have recently applied for a credit or credit card, your credit score will be reduced due to a hard credit inquiry. If you apply more than once, your credit score will be further reduced. In order to reduce your credit score less, you should do research before applying. Or if you take credit from the lenders you worked with before, you will get a chance to get it through soft credit inquiry. Hard credit inquiries are deleted from the credit reports within 2 years. However, credit reference agencies usually work on a yearly basis when calculating credit scores, so the effect on your credit score disappears in less than 2 years.
- You have a default decision and you don’t know it
‘Why is my credit score low?‘ This may be the last answer to the question. You may not know but may be a default decision against you. If the letter is delivered to the wrong address or never delivered to you, you may not be aware of the case. Credit reports should be considered in order to avoid such situations or to intervene directly.