We all know that your credit score is a key factor when it comes to getting approved for a mortgage. But what if your credit score seems to be stuck in neutral and won’t budge. You check it every month, and it’s the same it was last time you looked.
With all of the different factors that affect your credit, it’s normal for your score to have the occasional growing pains. But once you pinpoint the problem, you can correct it and have your score on the way up again. Here, USA Today goes over the most likely causes why your credit score hasn’t been increasing lately.
1. You’re using too much of your available credit
A lot of factors determine how your credit score is calculated, but the one with the largest impact on a month-to-month basis is your credit utilization, or the portion of your total available credit that you’re using. As a general rule, you should aim to stay under 20 percent to 30 percent credit utilization at all times.
So, if you have $10,000 in total credit available across all your cards, you don’t want to have more than $2,000 to $3,000 in balances. If your balances are higher than that range, then it’s likely holding back your credit score.
2. You’ve missed one or more payments
First the good news: Late payments only count against your credit score when they’re 30 days or more past due. If you miss a payment by a week, you may have to pay a late fee, but it won’t impact your credit score. The bad news, however, is that missing a payment by 30 days or more can be a big hit to your score.
It also can take more than a year for your score to recover. So, even if it has been a while since you missed a payment, that would explain why you’re still having trouble raising your score.
3. You apply for new accounts too often
The bank/lender pulls your credit file every time you apply for new credit, which results in what’s called a hard credit check. A single hard credit check isn’t a big deal, because it generally will decrease your FICO Score (the most widely used type of credit score) by fewer than five points.
But you could have a problem if you’re applying for new credit frequently. Those hard credit checks can add up, and even if they don’t decrease your score, they could keep your score from increasing and have you treading water.
4. Your accounts aren’t old enough
Because credit bureaus use the average age of your credit accounts as a scoring criteria, that means older accounts are better for your score. If you’ve opened one or more accounts within the past year, then those accounts may need to get a bit older for your credit score to increase. This issue is particularly common with consumers who open lots of different credit cards.
5. You have a major negative event on your credit report
Certain events—such as declaring bankruptcy, defaulting on a loan or having an account go to collections—can significantly impact your credit score. Not only will these events cause your score to drop quite a bit, but they’ll also continue to affect your credit for years to come.
If there are any negative items like this on your credit report, then it could take six months, a year or more before your score starts to increase again. Of course, you should review your credit report at least once a year to verify that there aren’t any false negative items causing issues.
6. You already have an excellent credit score
The higher your credit score gets, the harder it is to keep increasing it. When your score is in the 500s or 600s, you can increase it just by not doing anything wrong. If you pay your bills on time and don’t use too much of your available credit, then your score will steadily rise.
Once your score is in the 700s, increasing it can be more challenging. You can continue to improve your score, but progress will be slower. While you can work hard on optimizing your credit score here and getting it as high as possible, you should first think about whether that’s worth your time. The truth is that after you reach a FICO Score of 760 to 780, your credit score is high enough.