Common Reasons for Low Credit Score - as part of the expert series by GeoBeats. Here are some common reasons for low credit scores. First off, closing inactive credit care accounts. One of the ways your credit score is assessed is they look at your overall utilization rate. So, let's say you have two cards out and they each have a credit limit of ten thousand dollars, and you spend on average two thousand dollars a month. Your overall utilization is at ten percent, it is two thousand over the twenty thousand total available credit. Now let's say, you close one of those card, and you are still spending that two thousand. Well, now that two thousand is twenty percent of your credit limit. Now, that's going to be a ding to your credit score. Your utilization is going up. And so, you want to make sure the rule of thumb is that you generally have is you are using at least ten percent of your overall credit limit. So that is one thing you want to look at. You do not necessarily want to close all of your inactive cards. Secondly, and obviously making late payments. If you have made late payments and a lot of them and it is fairly frequent, it is a habitual problem, that certainly is going to affect your credit score. The other thing that is will to effect your account in a bad way is if you settle your account with an issuer. That means that you are negotiating with them for paying less than what you would have. So, let's say you have a problem with a credit card bill, and you talk to the credit card issuer, and they decide, "Okay, we will give you a break and we will let you pay say seventy five percent of the charge." That of course is going to effect your credit score in a negative way. So, once again, you have going to realize that that is probably going to effect that for quite some time. The other thing that effects your credit score in a negative way is high balances, once again, relative to your credit limit. So, you do not want to be spending. If you have a twenty thousand dollar credit limit, you do not want to be spending ten thousand dollars a month. That is going to effect your credit score in a negative way. Finally, you just want to make sure that you are not going out there and kind of taking advantage of excessive amounts of credit offers. So, if you are the kind of person that is a sucker for this great credit card deal of the month. That is not going to look great on your credit score. because it see is you as kind of a lover of going out and getting credit and essentially purchasing a lot of things. So, be careful about the late payments, taking on too many credit cards, closing too many inactive cards, and stay within a healthy ten percent of your credit limit across all your cards. That should help your credit score.
