How to Figure Out What is Hurting Your Credit Score

If you are denied credit for any reason there are three ways to obtain a sense for why that occurred:

  • In some cases, when you are denied credit, the denying entity is obligated to send a letter stating why they didn’t extend you credit. The letter might say something like: “too many inquiries”, “too many late payments” or “too high a debt ratio”. So, the reasons might not be specific enough to be actionable.
  • Another way to discover what is hurting your credit score is to ask. See if anyone will tell you what about your credit score is negative enough to cause them to deny you credit. They may or may not tell you, but it’s ok to ask about it.
  • Obtain your credit report and study it

Your Credit Information

The best way to find out what could be hurting your credit score is to obtain copy of your credit report and thoroughly examine it.

Your credit report is the repository of all the credit information you have accumulated over the years. This information is so important that you are entitled to one free credit report each year.

However, a credit score will not appear on your credit report. This is because a credit report does not include your income and your income is needed to calculate a final credit score. Plus, the credit reporting bureaus sometimes use dissimilar credit scoring systems.

What you want to dissect is the information that is in the report. Something in there is what is hurting your credit score.

Examine Your Credit Report

Your credit report contains six parts. You’ll want to study each of them for accuracy.

  • Personal Information: This section will have your name, addresses, places of employment, social security number and contact information
  • Consumer Statement: This is a statement that you have asked to be placed on the report. It could be a fraud alert or an explanation for some late payments.
  • Credit History: This is the area where you want to spend the most time. If there is an error, it will probably be in this section. It contains history on your home and auto loans, credit cards, collection activity and any other credit you’ve accessed over the last seven years. It includes the date the credit line was opened, the high balance, terms and the payment history.
  • Public Records: This will contain information that is a matter of the public record. Bankruptcies, tax liens or filings of judgment will be in this section.
  • Inquiries: This section lists all of the places that have asked to see your credit report over the last year. It is generated from credit applications that you initiated.
  • Contacts: This section contains mailing addresses and phone numbers for your creditors.

The factors that influence credit scores are:

  • Payment History (35%)
  • Debt Ratio (30%)
  • Length of Credit History (15%)
  • Type of Credit (10%)
  • Number of Credit Inquiries (10%)

Your credit score sums up your creditworthiness. Your credit report represents the way you handle your financial obligations. Use both to determine what could be impacting the way lenders view your credit potential.