Sense & Centsibility Blog

3 Reasons You May Have a Low Credit Score

If you read our blogs on a regular basis you've probably heard several of our writers say how credit can affect our lives in many ways. A low credit score can lead to difficulty getting or keeping a job, insurance rates, and interest rates on loans. Long story short, it's crucial to stay on top of your credit. If you have a lower score, here are likely the 3 main reasons why along with next steps:

Unpaid or charged off debt

Solution: Pay off the debt/s to show that it's paid in full. Or if you think you already did pay it off, send in a dispute to the credit reporting agency. (Here are the links to dispute for each agency: Experian, Equifax, Transunion.)

Inconsistent payment history

Solution: This is not a quick fix, but start making all of your payments on time moving forward. Late payments will continue to knock down your score.

High balances

Solution: Pay down your debt faster. If you have the means and your interest rates are low, you can try power paying. (Choose one credit card/debt to pay extra toward until it's paid off. Once it's paid in full, take that payment and put it toward another card/debt, and so on.) Otherwise, a Debt Management Plan can help you reduce interest rates and pay off your debt faster as well. (To see if the DMP is right for you, click HERE to start your free online financial counseling session with LSS or call us at 888.577.2227.)

As many of us learned from GI Joe, knowing is half the battle. To improve your credit score, be sure to pull your report from all 3 credit reporting agencies once per year. You can do so for FREE(without any gimmicks) from Annual Credit By looking at your reports you can determine what you need to work on to improve your score. For more info on credit and scoring, read Steps to Improve Your Credit FastUsing Credit Wisely, and Rebuilding credit after a blunder.

Author Elaina Johannessen is a Program Director with LSS Financial Counseling.