Purchasing a car or a house is a major decision. Deciding to go back to school is a significant life change. Sometimes, you need loans to make these major life events happen. It can be frustrating if your loan application is denied, and one of the most common reasons why applications are denied is due to a low credit score. You can check your free credit score at least once per year from all of the major credit bureaus. You should do so before you apply for a loan. Then, if your credit score is not what you thought it was, you should figure out why. What are some of the most common reasons why credit scores are a bit low?
The report is wrong
Sometimes, your credit report is not accurate. You can check your credit score at least once per year for free. You should take advantage of this. This gives you an opportunity to take a look at your report to see if there are any inaccuracies. There might be other people out there with the same name as you. Sometimes, their financial list apps can end up on your credit report. If there is something wrong with your credit report, you should reach out to the credit bureau as quickly as possible. Explain to them what happened, and they should remove the mistake. If you need help correcting your credit report, you may want to reach out to a financial professional who can assist you.
You paid your bills late
If you want your credit score to go up, you need to pay your bills on time. If you do not pay your bills on time, companies could report you to creditors. Then, it could end up on your credit report, reducing your credit score. It can be hard to keep track of so many bills. You might have a water bill, an electric bill, and a gas bill that you need to pay every month. Then, you might have a phone bill, a cable bill, and an internet bill. Develop a system to make sure you do not overlook any of these payments. If you pay your bills on time, your credit score should go up.
You declared bankruptcy
Finally, declaring bankruptcy can have a significant impact on your credit score. There are multiple types of bankruptcy, and you should always talk to a professional before you decide to take this step. Even though it could help you discharge some of your debt, it will also put a major dent in your credit score. Try to manage your finances appropriately to avoid declaring bankruptcy. Then, if you do have to declare bankruptcy, keep in mind that this will be on your report for several years. If you manage your finances well after declaring bankruptcy, your score will eventually come back up to a respectable number.
Improve your credit score
Ultimately, there are lots of reasons why your credit score might be low. Even though it can be frustrating, it is important to take a systematic approach. First, take a look at the credit report and make sure it is correct. Then, take action to increase your credit score. For example, if you pay off some of your existing loans, your credit score might go up. If you reduce your debt to income ratio, your credit score could improve. If you pay all of your bills on time, your credit score will gradually improve. If you take steps to increase your credit score, you increase your chances of receiving the best possible terms on your next loan.