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A low credit score can give you less control with your money. Landlords, lenders, insurers and even phone contractors may reject you if your credit score is low.
Nowadays, you can use credit report apps to find out your credit score. While these apps can be useful, they don’t tell you why your score is the way it is. If you’ve used one of these apps and discovered that your credit score is poor, here are a few possible reasons as to why it is low (and what you can do to bump up your score).
Regularly missed payments is one of the biggest reasons for having a poor credit score. If you’re in heavy arrears and a lender has taken further action such as calling a debt collection agency, this is likely to damage your score significantly.
Getting into the habit of paying every bill on time could help you to rebuild your score. This involves keeping track of your bills and budgeting effectively (bill management apps are great for setting reminders of bills and even helping you to set weekly budgets).
Too much consumer debt
Having a lot of debt can negatively impact your credit score. This can particularly be the case if you owe multiple creditors a lot of money, or if you have used a large percentage of your available credit.
Consolidating this debt to help pay it off could be a way of helping to rebuild your credit score. If you have multiple maxed out credit cards, you could take out a single loan to consolidate credit card debt. Consolidating debt may even save you money on interest in some cases, although this isn’t always the case.
Failed loan applications
If you’re rejected by a lender, it’s likely because you have a low credit score. However, in a vicious cycle, this rejection can go on your credit record and reduce your score even further.
If you know that your credit score is low, avoid applying to loans and credit cards unless you know that you’re going to get accepted. There are loans out there for people with low credit – some credit report apps may even be able to recommend these loans.
Conflicting names/addresses on accounts
Frequently changing your address or even changing your name can damage your credit score as it may suggest a lack of stability. However, one thing that can particularly raise red flags is using different names and addresses on different accounts. This can suggest potentially fraudulent activity – even if the true reason is simply because you’ve forgot to change your details.
If you change your address or change your name (i.e. when getting married or divorced), make sure to change these details on all your accounts. It’s worth also notifying all bill providers and changing details on your cards.
No credit history
If you’re young and never had to take out a loan or pay bills, you may not have a credit score. This may appear as a low credit score on credit report apps.
Building credit will help you to develop a score. Something as simple as making small payments on a credit card or taking out a phone contract may be enough to help you build credit – providing you pay your bills on time, your credit score should swiftly go from low to high.