Your credit score, as much of a headache as it can be at times, is a major aspect of your financial health. It can impact everything from your ability to rent a house, to your job prospects. And unless you’re well versed in the credit world, you may not understand why your credit score is so low. 

Although it might not seem like that big of a deal in your younger years, the truth is when you reach retirement age, you’ll be thankful you put in the effort to raise your score. A high credit score can give you financial peace of mind, and ultimately improve your quality of life. If your credit score is lower than you’d like it to be, here are some of the reasons that may be the case.

Late Payments

Late payments are your credit score’s worst enemy. Paying a payment late, or worse, missing it all together can make your credit score plummet. Even one single late payment can significantly lower your score, particularly if it’s over 30 days past due. When you pay your creditor past the due date, they report this late payment to the credit bureau, which will then lower your score. Unfortunately, these late payments can stay on your credit report for as much as seven years impacting your overall creditworthiness.

High Credit Utilization

If you’re using over a certain percentage of your overall credit allowance, then this will ultimately lower your score. Financial experts recommend staying below 30% of your overall credit allowance if you hope to keep your score a decent number. In other words, stop maxing out your cards or high carrying high balances if you hope to raise your score.

Young Credit History

Unfortunately, the way the credit world works is that no credit is the same as bad credit. In other words, if you’ve recently just gotten a credit card, then you’ll need to work your way up from the bottom. You need to prove to creditors that you’re capable of paying off your credit, and building a name for yourself amongst a wide variety of credit cards. 

This will take a few years to build a sufficient credit history if you hope for creditors to trust you with a loan. In order to build a solid credit history, you want to start with one credit card, and pay off all your small purchases promptly every month. Over time, the credit card company will likely increase your credit allowance, and you continue building from there.

Items In Collections

Sometimes we’re convinced we’re doing all of the right things to build our credit score, when the entire time we’ve had something in collections that was bringing our score down. Negative public records like a tax lien or a bill that was sent to collections can have a horrible impact on your overall credit score. Make sure that you don’t have anything in collections by reviewing your full credit report, and taking action where necessary.