Why is my credit score not improving?
You're putting in the work—you make your payments on time, keep track of your spending and try not to splurge on unnecessary items. Overall, you believe you have made all the right moves to create a healthy credit score. You check your score on Chase Credit Journey® or your bank's mobile app, only to see that it hasn't budged—why?
In this article, you will learn:
- What affects your credit score
- Reasons why your score isn't improving
- Helpful ways to build credit
What affects your credit score?
Your credit score is generated based on a number of factors, including, but not limited to:
- Payment history
- Credit utilization
- Credit age
- Credit mix
Depending on the score model used, each of these factors may be weighed slightly differently. For example, if you receive your score through Credit Journey®, you'll notice that your credit score is based on the VantageScore® 3.0 model powered by Experian™. Other factors outside of these could indirectly affect your score as well.
Depending on your financial situation and the choices you make, you may see your score plummet or rise. For example, if you recently filed for bankruptcy, this derogatory or negative remark may appear on your credit report and impact your credit score significantly.
On the other hand, if you increase your credit limit, you may be positively adjusting your credit utilization ratio. This ratio is the percentage of how much of your available credit you use. When this number is lowered to about 30%, this could help increase your credit score.
Reasons why your score may not be improving
Even if you're doing all the right things, you might feel like you're stuck. Maybe your credit score has plateaued and it hasn't changed in months. There are a few reasons why it may not be improving in the ways you had hoped. Let's explore some of these in more detail below.
Your score is already high
If you're already maintaining a good credit score, it could be that you've "plateaued" at a certain number. If you want to increase it even more, you may need to go the extra mile by diversifying your portfolio with new accounts or simply being patient and waiting for your credit to age. Keep in mind that taking out a new account could temporarily hurt your score at first due to your lender running a hard inquiry.
You have a derogatory remark
Derogatory remarks on your credit report may linger for seven years (or sometimes more). These negative items could be holding you back from achieving a higher score. It may also signal to lenders that you are a potential risk, making it more difficult to unlock opportunities that could eventually help improve your score (such as opening credit card accounts with higher credit limits). After the remark falls off, it's possible you'll see a jump in your credit score.
You have an outstanding balance
Whether it's a loan you took out or a credit card bill you've been meaning to pay off, high, outstanding balances that continue to remain high could be holding you back from achieving a higher credit score. Review all open accounts and develop a comprehensive plan to pay each one off over time.
You're using too much of your credit
Let's say you have two credit cards and between them you have a credit limit of $10,000. If you're using over 30% of this amount (or over $3,000) you could be hindering your chances of getting a higher score. A credit utilization ratio of about 30% is an important way to showcase your ability to manage your finances and only use the amount of credit you need.
Potential fraud or errors
It's possible that your information was stolen and used against you, which can negatively impact your credit score. That's why it's important to monitor your credit with tools like Chase Credit Journey and enroll in credit and identity monitoring services. If you catch errors ahead of time, you can dispute them and have them removed from your report, replenishing your credit score.
Helpful ways to build credit
If you're looking to improve your credit score, remember that there are a variety of factors that can affect it. The ways you should build your credit depend on your specific situation and it comes down to what is feasible for you. Depending what your goals are, you could build your credit up quickly, or it may take a longer period of time.
Would you like to increase your score with some personalized assistance? To get a customized plan, enroll in Credit Journey and use the credit planning feature. This feature provided by Experian™ offers you a personalized action plan for how to improve your score by a targeted date. Having a score goal in mind and a list of to-dos can help break down this process in a more user-friendly way.
For the most part, you can build your credit by:
- Making payments on time and in full
- Having a diverse credit mix to strengthen your credit history and portfolio
- Having credit card accounts open for a long period of time
If your score plateaued, you may want to consider diversifying your account to showcase your reliability with a variety of lenders. Keep in mind that this could hurt your score at first due to your lender running a hard inquiry, but over time this diversity can help improve your score.
The bottom line
Whether you've plateaued, negatively impacted your credit utilization ratio or have an outstanding derogatory remark, the reason(s) why your score is not improving can be detected with a little diligence and research.
The fact that you're keeping an eye on your credit score and aiming for a higher one is an admirable goal — it shows you care about your financial well-being and hope for a better future. By maintaining healthy financial habits and utilizing available resources, you may reach your ideal credit score sooner than you realize.