Alright. Its time to stop sugar coating your credit score. For months you have been trying to figure out why your score is in the 400-500 range. You ask yourself “Is There Hope?” or “Can I at least get my score to 590 or 600. I am here to tell you YES! The only way to find the solution to a problem, is to first admit that you have a problem and to point out what the problem is. Here are the 4 reasons why your credit score is still in the 400-500 range.
1. Too Many Collections On Your Report
One of the biggest mistakes you make is simply letting an account go into “Collection” status. This is when you originally owe a company money for something, they try to get a hold of you by calling and such, but they are unsuccessful at doing so. At that point, they send your account and the balance due to a Collection Agency. This can decrease your score 15-45 points and sometimes more. This is the main reason you have a 400-500 credit score.
2. Too Many Late Payments
Payment History is the most important scoring factor in the algorithm for credit scoring. 35% of what makes your credit score comes from this alone! Because of this, credit reports show the last 48 payments to lenders to show whether you pay on-time, sometimes late, or always late. Most credit reports with multiple late payments are almost guaranteed to have a score in the low 500’s to mid 400’s. The only way to combat this is to make more on time payments.
3. 80%-90% Of The Accounts On Your Credit Report Are Closed With Open Balances
This normally happens right before the account goes into collections. Whether you closed the account or not, most financial institutions will close the account for you due to non-payment with an open balance due. This also creates another problem…….Shorter Credit Length History. This means that all of the positive and negative activity on this account will become an non factor in 7 years from the last activity date. A short credit history is not a good sign for lenders as it doesn’t show that you can manage your credit over time.
4. Public Records
Public Records are the most devastating factors on a credit report. They can affect a credit score and report so much so that this information is open to the public for free……hence the name PUBLIC RECORD! These records consists of Civil Judgments, Child Support, Bankruptcy, & Tax Liens. This information is open to the public simply because most of the require a legal or government response to complete. These can hurt your score and report for years and as much as 80-100 point decrease. The only way to combat this is to pay the amount due and see if they are willing to remove them from your credit report.
The Bottom Line
You should now be able to put together a plan to increase your score and get out of the 400-500 score bracket. Of course, some credit reports are different than others but what remains a fact is that these four factors will decrease your score dramatically and more than likely give you a low credit score. For more topics like this or to learn how you can personally increase your credit score with a personalized Success Plan, please read below.