Factors That Contribute To Low Credit Score

A low credit score can be caused by many things, instead of just neglect, resistance and no effort. Many people have bad credit scores simply because they do not always make their payments on time, never allow their credit balances to payoff or go over their credit limits. Some people fall on hard financial times, such as job loss, illness, divorce or other factors. Most of these people have a low credit score to reflect their inability to pay and this commonly leads them down the path of obtaining new loans and financing.

Many people have a low credit score simply because they do not understand how their credit works. They do not understand that to have a good credit score you must make payments on time. They do not understand that to have a low credit score, you can be charged up front, or in commissions and have your invite letters sent out, for late payment or no payment of the balance.

By paying your bills on time ahead of time, you can establish a solid history of on time payments, a good payment history and your credit score should be rising. If you have outstanding bills or collections, paying them off or negotiating reduced payments will raise your credit score. Keep in mind that payoffs of old collections can sometimes take time, effort and money, and you should avoid paying off a bill until you have as much money as you can afford as it may be paid off before it is established so that your score can be improved.

It seems like it should be the other way around, but a low credit score can hurt when applying for a job, renting or buying a home, and other financial-related potential. An employee credit scoring employee has the most access to your credit history, which includes using a score to determine monthly payments, mortgage or rent, car payments, life insurance premiums and even potential employment.

A third factor that can contribute to having a low credit score is insufficient credit history. Many people have bad credit because they only obtain a credit card or a loan and never use it and are very careful now at only using it when they absolutely have to. These people often times find that when they have a child or have to buy a car it is difficult to obtain a loan and so they do not have enough established credit. In other ways they have no established credit and their credit score is low.

With you establishing and maintaining an adequate credit history your credit score will rise. It will not happen over night, but will happen overtime as long as you have a positive financial outlook. An important step in increasing your credit score is to make your payments on time. Most credit card companies will report payments made within the time they are due, even if they were not made on time.