Common causes of bad credit
Quick insights
- A strong credit profile can help you access the opportunities you want, such as approval for loans, credit cards, jobs and approval for rentals.
- While some credit scoring models do not label any credit score as “bad,” a person may use this term to describe their credit score due to difficulty accessing new opportunities.
- Some credit behaviors can contribute to low or so-called “bad” credit scores, including (but not limited to) paying bills late, high credit utilization, defaulting on loans and bankruptcy.
Having a strong credit profile can help a person get approved for financial, housing and job applications— three things that tend to be important in a person’s life. Credit score models often have credit scoring ranges that go from poor to exceptional. If your credit score falls in the poor category as referenced by some models, you might feel this is "bad credit." While there is technically no definition of a "bad" credit score, in this article the term "bad credit" refers to low credit scores.
In this article, we’ll dive into some need-to-knows about credit scores, including what lowers your score, what causes “bad” credit history and steps you can take to help improve your score.
What is a credit score and how is it calculated?
Your credit score is based on several factors, including your credit history. Credit scores are determined by credit scoring models (notably, VantageScore(R) 3.0 and FICO(R) 8) which assess different aspects of how you’ve used credit, including your history of on-time payments and credit utilization. As of May 2025, the ranges for VantageScore 3.0 are:
- Excellent: 781 to 850
- Good: 661 to 780
- Fair: 601 to 660
- Poor: 500 to 600
- Very poor: 300 to 499
The ranges for FICO 8 are:
- Exceptional: 800+
- Very good: 740 to 799
- Good: 670 to 739
- Fair: 580 to 669
- Poor: 579 and below
Neither scoring model labels any credit score as “bad.” This is a subjective term a person might use when they’ve had difficulty with approvals related to their score, but not a formal designation.
How do you get a “bad” credit score?
So, if you’re at the point where you do feel like you have a “bad” score, you may be wondering what the factors are that impact your score. In this section, we will detail the various factors that can lower someone’s score.
Late or missed payments
This is considered a high-impact factor for both scoring models VantageScore and FICO. One late or missed payment can cause your credit score to drop and may remain on your credit report for a while. The impact may not happen immediately, as it’s up to your creditor’s discretion to report the late payment. If you have trouble remembering your payment dates, setting reminders or enrolling in autopay can help keep you on track.
High credit utilization
When you receive a new credit card, it typically comes with a designated credit limit. Your credit utilization ratio is the amount of credit you use against the total of all your credit limits. A ratio of 30% or less positively impacts your score.
For example, if you have only one card with a $10,000 limit, 30% would be $3,000 spent. Getting into the habit of paying off balances more frequently may help lower your ratio and consequently improve your score.
The impact of bankruptcy
When a person’s debt becomes overwhelming, they may decide to file for bankruptcy. Bankruptcy is a legal process that can help a person seek relief from their creditors, sometimes resulting in some or all their debts being discharged. In general, bankruptcy is a last resort, as it can have negative effects on one’s credit and other areas. According to Experian, the effects of a bankruptcy can last on your credit report for up to 10 years.bankruptcy-fall-Off
Charge-offs
If you have missed multiple payments, a creditor may decide to “charge off” the debt. A “charge off” is a way for the creditor to write off the loss for tax purposes, and it can also significantly affect your credit score. A charge-off often means that the debt has or will be sold to a third party. To prevent further harm to your credit score, it’s important to make efforts to repay this debt quickly, potentially through negotiating a repayment plan.
The effects of too many hard credit checks
Soft and hard credit checks can have different effects on your credit score. Soft credit checks do not impact your score and are often used for background checks or pre-approval offers, or when you check your own credit report. A hard credit check is typically run when you formally apply for a line of credit, such as a loan or credit card. In that application, you are providing your consent to the potential lender to run a hard credit check.
Too many hard credit checks may temporarily affect your score negatively. Applying for multiple financial products at once can be interpreted as risky credit behavior, so you may find it beneficial to space out applications over time.
The challenge of a limited credit history
A long track record of careful credit use can help build your score. But what about for those who are just getting started? Unfortunately, those with shorter credit histories (even with careful use) may have a difficult time achieving a high credit score. Making timely payments over long periods of time, using a mix of different credit products and maintaining active accounts can help build your score.
In conclusion
If you’re not sure where your credit score stands, it may be time to check. Chase Credit Journey® is a free online tool that you can use to view your score anytime. You can use the credit score improvement feature to receive a personalized action plan, provided by Experian. Note: you don’t need to be a Chase customer to enroll.
