3 Reasons Why Your Credit Score Isn't Budging

Sky-high balances, missed payments, or an old collections debt could be keeping your score from soaring.

Todd Campbell
Todd Campbell
Oct 3, 2015 at 7:00AM

Source: Flickr user Sean MacEntee

A high credit score can help you get the best rate on your new home or car loan, but if you're checking your credit score regularly and it isn't budging then you might want to see if one of these three reasons is to blame.

No. 1: Balances remain too high

You may have already read that using less than 30% of your available credit line on credit cards results in a higher credit score, but you might not know that the best score is associated with a utilization rate that's below 10%.

Also, you might not realize that the major credit bureaus calculate your credit card utilization in two ways. First, they add all your balances and credit limits together to see what your utilization is overall. Then, they look at each card individually.

If you're credit score is stuck in the mud, make sure that the culprit isn't one card with a high balance. If it is, transferring or paying down some of the balance on that card might give your score a boost.

No. 2: One lender reporting late payments on multiple loans.

Your payment history makes up as much as 35% of your credit score, so missing a payment is a sure-fire way to wound your credit score; especially if the missed payment is to a lender from which you have multiple loans.

Students often take out multiple student loans from the same lender over their college career and if those loans haven't been consolidated, then missing payments to Sallie Mae or Navient could result in these companies reporting missed payments on multiple loans, rather than on just one loan.

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This is a tough problem to fix, but there may be options. If you've found this has happened to you, then reach out to your lender and ask for a goodwill adjustment. If your account is in otherwise good standing, then they may be willing to accommodate you and remove the late payments from your record.

If a goodwill adjustment isn't in the cards, see if you can get them to give you a clean slate in exchange for signing up for automatic payments.

Still no luck? Unfortunately, there's little else left to do beyond disputing your missed payments and hoping that the lender fails to follow up with the credit bureau or waiting for late payments to age off your report.

Typically, reported late payments of 30 to 60 days overdue result in your score dropping by the most in the first year. After year one, the negative impact will wear off. However, reported late payments of 90 days overdue or longer can continue to hurt your score for years.

No. 3: Collections remain on your report

Remember that bill for the lab work that was done years ago that you forgot to pay? Well, it could be weighing down your credit score.

When debts -- even small ones -- get sent to collections, it's considered a major event and it will hurt your credit score for seven and a half years from the date that you first fell behind with the original creditor.

The damage to your score will continue even if you settle up with the collections company, although some are willing to strike the mark on your credit if you send them a goodwill letter.

Because credit bureaus often prevent collections companies from making goodwill adjustments, consumers are left with two options: disputing a collections event on a report in hopes that the original lender doesn't get back to the credit bureau within the response period or waiting for the collections note to age off the credit report.

On solid financial ground

It can be a lot of work getting your credit score to envy-inspiring levels, but it's worth it. A high credit score will make lenders compete for your business and that means that they'll negotiate terms in your favor, which can translate into thousands of dollars in savings over the life of a loan. For that reason, if your credit score isn't budging, it may be time to do some digging to find out why.