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What Lowers Your Credit Score: A Guide on Everything to Know

What Lowers Your Credit Score: A Guide on Everything to

What Lowers Your Credit Score: A Guide on Everything to Know

There’s no worse feeling than going to the bank to talk about getting a loan only to find out you don’t qualify. 

It’s embarrassing and can make you feel incredibly low. Worse yet, it can be frustrating and confusing for those who don’t fully understand why it happened. Many people who are turned down for loans are taken completely off-guard.

We’re going to clear a few things up, namely, what lowers your credit score. 

If you’ve had a bad difficulty getting approved for loans or lines of credit in the past, our goal is to help you understand why. Keep reading for our quick guide on what lowers your credit score and how to turn things around!

What Lowers Your Credit Score

As you read through our list, it may come as a shock to you just how many things are taken into account to determine your credit score. While it would be easy to throw your hands in their air and give up, we highly recommend you take a different route.

You see, your credit score is vital for getting approved for car loans, home loans, apartments, and credit cards. It also affects your interest rating on these loans, which over the years can add up to tens of thousands of dollars. Your credit score also affects how much you can get approved for on said applications.

If you want to improve your credit score, take a look at our list of the top nine things that lower it.

A High Debt-to-Income Ratio

Your debt-to-income ratio is a relatively easy concept to grasp. It is the basic formula of money coming in versus money going out. However, this only looks at debts, leaving out things such as groceries, gas, utilities, etc. 

To find your debt-to-income ratio, take all of your debts and divide them by your income (after taxes). If your answer is lower than .43 (43%) than you’re doing good. If not, you may have difficulty getting approved for loans or loans with low-interest rates.

To improve this rating, start paying down debts. Generally, start with the smallest debt first. Once that’s paid off, use the money previously designated for that payment and throw it at your next smallest debt.

Maxed Out Lines of Credit

Another answer to what lowers your credit scored is maxed out credit lines. This includes any revolving lines of credit, typically credit cards.

Having a few credit cards isn’t a bad thing. In fact, credit cards can actually have a positive effect on your credit score. However, having any of your credit cards at their maximum limit is bad.

It shows creditors that you can spend easily, but not pay back easily. This is not the characteristic of someone they want to loan to.

Little or No Credit History

No credit history can be just as bad as negative credit history. You don’t start fresh out of the gate with a sterling credit score, you have to build it up.

The best way to do this is with simple credit cards or very small loans. Remember not to max out your credit lines, but you must use them. A credit card sitting with a $0 balance won’t do anything for you.

We recommend using your credit card for groceries, gas, etc., then paying it off every month down to zero. However, don’t get in over your head or your credit builder will become your credit destroyer.

Making Late Payments

Your payment history is a large factor in determining your credit score. Creditors want to see how you have treated other debts and bills.

If you have a history of making late payments, they won’t be chomping at the bit to loan you money. A few late payments over the course of a couple of years is no big deal, but a repeated offense is what lowers your credit score.

Missing Payments or Making Partial Payments

Even worse than late payments are non-payments or even partial payments. Again, remember that your credit score is a tool creditors use to determine if they want to trust you with their money. 

If you have a habit of missing payments altogether or only making partial payments, it won’t bode well for your application.

Having Too Many Credit Cards

Earlier, we told you that owning a couple of credit cards is a good thing, assuming you keep them paid down. However, too much of a good thing can be bad. Even drinking too much water can kill you.

Likewise, too many credit cards in your name can quickly become what lowers your credit score. It shows potential creditors that you may have trouble paying all of those lines of credit each month. 

Think twice about applying for in-store credit cards, even if the deal seems too good to be true.

Having Bills Sent to Collections

If you are negligent on any payments long enough for them to be sent to collections, it can very negatively affect your credit score. 

This shows creditors that you not only miss payments but do so to the extent that third parties need to get involved. For this reason, it’s important to always update your address if you move. Otherwise, you could have bills sitting in the mailbox of an empty home.

Applying for Multiple Lines of Credit/Loans

In an attempt to beat the system, applying for multiple loans can also be what lowers your credit score. However, in the case of “rate shopping” for home and auto loans, it usually isn’t affected poorly. 

On the other hand, applying for multiple lines of credit within a short period of time will lower your credit score.


Finally, errors can be another contributing factor to what lowers your credit score. No person or company is perfect. It’s not uncommon for mistakes to be made by others which negatively affects your credit score.

That’s why it’s important to frequently check your score and take an in-depth look if something seems off. In this scenario, you can dispute the error to get things lined up.

Start Making Changes Today

Now that you know a little more about what lowers your credit score, hopefully, you have a good idea of how to turn it around!

We hope this article was helpful to you. If it was, be sure to check out the rest of our financial articles and posts. Good luck with your credit score!


Can You Get Big Loans with a Bad Credit Score? Yes, It’s Possible. Here’s How

Can You Get Big Loans with a Bad Credit Score?

Can You Get Big Loans with a Bad Credit Score? Yes, It’s Possible. Here’s How

Bad credit is a serious problem for a lot of Americans. In fact, approximately 25 percent of all Americans (that’s 43.4 million people) have a credit score that is 599 or lower.

If you’re part of this group, you know that getting approved for credit cards and loans (especially big loans) can be quite challenging.

It’s important to know, though, that it’s not impossible for you to get the money you need, even with a low credit score.

Read on for some tips that will help you get big loans if your credit score is subpar.

Learn Your Credit Score

The first step to take if you want to apply for a loan is to check your credit score. A lot of people have no idea what their credit score is or if it’s accurate.

Start by checking your credit report and finding out your score. Then, look more closely at your report to see if there are any errors that are bringing your score down. If you notice any errors, work on getting them corrected as soon as possible.

Evaluating your report will also give you insight into the issues that have caused you to have a lower score. Is it a lot of late payments or missed payments, for example? 

Work with a Credit Union

Once you know where you stand with your credit score, you can do some more research and find out which lenders are most likely to work with you.

As a general rule, credit unions are often more forgiving than banks and are more willing to work with people whose credit is less-than-stellar.

Reach out to a local credit union and find out what kind of loans you qualify for. You might be surprised at what’s available.

Apply for a Secured Loan

If your credit score is low, you might still be able to qualify for a secured loan.

Secured loans require you to offer up an asset like your car or your house as collateral in exchange for funding. Lenders are more likely to approve your application if they know that the loan is secured against something for value.

Make sure you have a plan to pay back this loan, though. Otherwise, you’ll end up losing your belongings if you can’t meet your payments on time.

Find a Co-Signer

Having someone with a high credit score co-sign your loan is a good way to access financing when your own credit isn’t up to par.

A co-signer is someone who agrees to take over your loan if you default. It’s a big responsibility, so it can be hard to find someone who’s willing to do it.

If you can, though, it’ll help you build your credit while also giving you access to the money you need.

Consider Personal Installment Lenders

A personal installment lender takes a lot of factors into account (not just your credit score) when determining whether or not they’ll provide you with the money you need.

Look into working with one if you’ve been turned down by other lenders and need money to cover a large emergency expense.

Work with an Online Lender

Online lenders are another good option to consider if you find yourself getting turned down by traditional lenders.

According to Bonsai Finance, online banks often offer better loan terms and interest rates than traditional lenders. They’re often more flexible as well and have options for people in all financial situations, including those with bad credit.

Before you agree to work with an online lender or give them your personal information, be sure to do some research to make sure they’re credible and don’t have any complaints against them.

Get Multiple Quotes

No matter what kind of lender you’re considering using, it’s smart to get multiple quotes before you agree to work with one over another. 

Doing some research upfront will help you ensure you’re getting the best rates, loan terms, and fees possible. 

Beware of Predatory Lenders

When your credit score is low and it’s harder for you to get lenders to approve your loan applications, you’re a prime target for predatory lenders.

Be wary of loan offers with terms that seem too good to be true. There’s a good chance they are.

Many predatory lenders offer loans that seem great on paper but are actually full of fine print that can cost you a lot of money in interest and fees later on.

Always read through loan agreements carefully before you agree to work with a particular lender.

Improve Your Credit Score

All of these strategies are useful when it comes to trying to get a loan with a bad credit score. While you’re working on choosing the best loan situation for your needs, though, it’s important to also work on improving your credit score.

Set up automatic payments to avoid late penalties, and make sure you’re keeping your credit utilization as low as possible.

You might even want to delay applying for a loan for a just a few months until you can raise your score. Even raising it by a small amount can help to increase your chances of approval and allow you to enjoy better terms and interest rates.

Get Big Loans Today

As you can see, it’s totally possible to get big loans when you have a low credit score. The key is to make sure you’re implementing the tips listed in this post. 

It might take a bit of trial and error for you to get your loan application approved, especially if you want a loan with great terms and interest rates.

If you know all your options and take the right steps when applying for these loans, though, you’ll be much more likely to get approved and get your hands on the money you need.

Do you want to learn more about how to qualify for loans and manage your money?

If so, we’ve got plenty of helpful resources available to you. Check them out today by visiting the Money Management section of our website.