The eligibility criteria from personal/business loans differ from one lending institution to another. But no lending institution provides credit to borrowers who do not have good credit scores. A good credit score will definitely help you to choose from a variety of secured and unsecured business loan products at low interest rates and favourable terms. In addition exploring ways to improve your credit score, it is also important to monitor your personal credit score consistently. However, you also need to understand a number of reasons that prevent your credit score from improving in a timely manner. These might be the seven reasons why your credit score is not improving even if you are following other best practices and trying hard to improve the same.
7 Reasons Why Your Credit Score is not Improving
1) You are not repaying debts on time
There are a number of factors that impact your personal credit score directly and adversely. Payment performance is one of such factors. Your credit score will remain stagnant if you are not paying personal loan, home loan, auto loan, or student loan EMIs on time. Also, your credit score will be affected if you do not pay credit card bills on time. In addition to affecting the credit score, the payment delinquencies will also appear in your credit report.
2) You are not paying credit card bills in full
The credit card issuers allow you to pay credit card bill in full or pay only the minimum amount due. You can always avoid paying the total amount due on a credit card by paying only the minimum amount. But the option will require you to pay interest at a much higher rate on the outstanding balance. At the same time, it is also impact your personal credit score directly. You must pay credit card bills fully and timely to maintain a good credit score.
3) Your credit card balance exceeds credit limit
Like payment delinquency, revolving credit utilization also impacts your personal credit score directly. There are always chances that your personal credit score is not improving due to high revolving credit balances – overdraft and credit card balance. Each revolving credit product allows you to avail credit up to a predefined limit. When the credit balance is closer to the credit balance, it depicts that you have utilized most credit. You must keep the credit utilization below 30% of the credit limit to improve your personal credit score.
4) You have closed unused accounts
The length of credit history is one of the important factors affecting your credit score. Like other borrowers, you may believe that your credit score will improve if you close the unused accounts. However, you can easily improve your credit score by keeping unused accounts open for longer duration. You even have option to keep unused credit cards or overdraft accounts open without using them. Your credit report and score will improve when you maintain unused credit accounts for longer duration. Here are some handy tips how to maintain and improve your quality score.
5) You are applying frequently for credit
You must remember that each time you apply for a loan or credit card, the information depicts in your credit report. Normally, your personal credit score is calculated based on the information included in your credit report. Hence, the information impacts your personal credit score directly. You must not apply for credit frequently to improve your personal credit score.
6) You have something negative from the past
There are always chances that your credit score may not be improving due to negative credit history. In addition to payment delinquencies and payment history, exceptional negative items in your credit history also keep your credit score unchanged. Negative information like debt settlement and bankruptcy further appears in your credit report for a period up to 7 years. Hence, you cannot improve your credit score consistently without keeping your credit report clean.
7) There are errors in your credit report
As noted earlier, your credit score is calculated based on your credit report. Hence, the errors in your credit report will have a huge impact on your personal credit score. Your credit score may remain unchanged due to minor errors in the credit report like misspelled name, erroneous payment delinquency, or outstanding debt. It is always important to read and analyze your credit report regularly to identify such errors. You also need to get the errors found in the credit report rectified without any delay to improve the credit score.
However, you must remember that personal credit scores are calculated based on a number of complex credit scoring formulas. You will find it difficult to track these credit scoring formulas accurately. But you can easily understand why your credit score is not improving by analyzing your credit report. You must read your credit report thoroughly to understand why your personal credit score remains static over a period of time.