Are you wondering why your credit score isn’t improving and just seems to be getting worse?
Well, when it comes to your credit score there are some important things that you need to remember.
In order to understand your credit score, you will need to understand how it is measured and what factors affect your score.
Here we will look at some of the reasons your credit score may be lower than you think it should be.
Hard Credit Checks vs. Soft Credit Checks
If you have started tracking your credit score online with an application, then you need to learn about the difference between a hard credit check and a soft credit check and what it means for your credit score.
To begin, a hard credit check is your typical kind of credit check and they occur when you go to the bank to apply for a credit card, loan, mortgage, or line of credit.
What the banks do is they will pull your credit score and history from various credit bureaus.
When they do this your credit score may actually lose some points, but typically this is just a short dip and often times your credit score will recover quickly.
With that being said, if you are constantly checking your credit score it may have a long-lasting negative impact.
A soft credit check is one that does not actually lower your credit score.
These checks often times pull less information and make some assumptions about your credit.
The great thing about these credit checks is that they should not lower your score over time.
If you are tracking your credit score make sure you are using an application that only conducts soft credit checks as hard credit checks can lower your score.
Applications like Credit Karma and Borrowell will typically offer soft credit check services so check them out if you are interested.
Credit Card Utilization
If you want to help improve your credit score then you will want to learn about credit card utilization and how it affects your score.
When you are using your credit card, your utilization rate will be the average amount of money you have to repay divided by the total amount of credit available to you.
The resulting number is called your credit card utilization rate and it is used to help determine your credit score.
Typically, the lower your credit card utilization rate the better.
If you are looking to improve your credit score make sure you have a low credit card utilization rate as this will help you gain a few points.
In order to see the true benefits you may want to see about increasing your limit but you must remember that this may also hurt your credit score in the short run if they have to pull a credit report to give you an increase.
One good way to get your level of credit increased without taking a ding on your credit score for the hard check is by waiting until your bank pre-approves you for a new credit limit.
Often times this will happen after the holiday season and generally, they will not require a hard credit check since you have already been pre-approved.
Generally, if you have late payments then your credit score will go down.
It is important to at least pay the minimum payment amount for each of your credit card bills so that your score is not negatively impacted.
Get New Credit
If you are looking for another way to increase your credit score then you will want to make sure you are taking on different types of credit.
This can change the fact that your credit score isn’t improving.
According to an article on Credit Review, taking on new forms of credit can help build your credit score because it shows the credit bureaus that you can be trusted with many different credit options.
This can not only help increase your credit score in the short term but it can also help keep it higher over the long run.
If you are looking for ways to increase the different types of credit you have one good way to do that is by taking out a loan, opening a line of credit with a bank, or opting for a mortgage on your home.
If you have been tracking your credit score and it seems lower than you expected then maybe it is because of one of the reasons mentioned above.
Work on these to fix why your credit score isn’t improving.
If you want to improve your credit remember that it is a long term game that will require some patience but if you follow these simple tips you should be able to have an amazing credit score in the near future.