Home > 2015 > Credit Score

Why Isn’t My Credit Score Going Up?

Advertiser Disclosure Comments 4 Comments

Sometimes getting ahead feels more like a herd of turtles than a rabbit. That’s especially true when it comes to credit scores.

Check out this reader question, and see if you can relate.

Hi! I have a question for you. I’ve been working on improving my credit score for about three years now, but I cannot seem to raise it above 640. I have a few credit cards, with decent limits, not as high as I would like, and low utilization, a car loan, and nothing in collections for a few years. My credit reports say that low credit limits and time limits are hurting me, as well as the collection from a few years back (settled). What can I do? — CZ

Here’s your answer, CZ!

There are all kinds of things that can impact a credit score.

Why Is My Credit Score So Low?

Several years ago, FICO, creator of the most commonly used credit score, revealed how certain actions affect credit scores. Here’s a list of some of the most common score busters.

  • 30-day late payment — 60-110 points.
  • Debt settlement — 45-125 points.
  • Foreclosure — 85-160 points.
  • Bankruptcy — 130-240 points.
  • Maxed-out card — 10-45 points.

The higher end of the ranges above would generally apply to those with the highest scores (780-plus) and the lower end to those with lowest scores (below 680). Keep in mind that a perfect FICO score is 850, and to get the best possible interest rates, depending on the lender, you’ll need 730 to 760.

Why Does It Matter?

CZ is right to be concerned about her credit score. Bad scores mean less access to credit and higher interest rates when an application is approved. Less access to credit can lead to lost opportunity, and higher rates can cost a ton of extra money.

Consider the mother of all debt: a mortgage. Say you’re borrowing $200,000 on a 30-year fixed-rate mortgage. Show up at the lender’s office with a 620 to 639 credit score, and at today’s rates you’ll pay 4.954%. If you make minimum payments, your total interest bill over 30 years will be $184,490.

But if you waltz in with a 760 or higher score, you’ll pay only 3.365%, and your total interest bill declines to $117,911.

So over the life of this loan, the lousy score will cost a borrower an extra $66,579. That’s enough to finance your own business, put a kid through college, or maybe retire a year or more earlier.

(By the way, the information above came from a calculator from FICO. Check it out for yourself.)

The Opportunity Cost of Bad Credit

Another even more dramatic way of looking at the same thing is to consider opportunity cost, a term describing how money you spend today can cost you in terms of the opportunity to have more money tomorrow.

Because of our low score, the higher interest rate on our $200,000 loan means a monthly payment of about $1,094 a month versus about $883 a month for a borrower with a higher score. So the person with the higher score has the opportunity to save about an extra $200 per month. If they use that opportunity wisely and invest their $200 monthly for 30 years and earn 8 percent on it, possible in the stock market, they’ll end up with an extra $298,000. That’s enough money to change your life.

In short, bad credit is expensive. If more people realized that, maybe we’d have fewer lousy credit scores floating around out there. According to the Corporation for Enterprise Development, in the third quarter of 2013 more than half of Americans had subprime credit, which generally means a FICO credit score of less than 640.

What Should CZ Do?

Now let’s (finally) get back to CZ’s question: “My credit reports say that low credit limits and time limits are hurting me, as well as the collection from a few years back (settled). What can I do?”

I doubt that low credit limits are hurting CZ. But if by “time limits” she means not enough time has gone by, I’m on board. I suspect that this was a seriously low credit score at one point. Otherwise, three years of on-time bill payments should have lifted her score over 640 by now.

She’s done what she can: Perhaps she’s gotten new credit. She has various types of credit, revolving (credit cards) and installment (car loan), and is keeping her utilization ratio low (not using all her available credit). She’s also hopefully paying her bills consistently and promptly.

What’s left? Time. Like many mistakes in life, when it comes to credit, it can take days to screw up and years to recover. Also like other mistakes, however, as time marches on, they have less influence. So if CZ has been doing everything right for three years, it shouldn’t be much longer before she sees significant improvement in her score.

This post originally appeared on Money Talks News.

More from Money Talks News:

Image:  iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • James M

    I paid off all of my collections in September of 2012. I have multiple credit cards with anywhere from $1500 to $5500 credit limits and low utilization. I also had a personal loan I took out from the bank and paid off and a car loan I’m half way through paying on. I only have one collection showing on my credit for an electric bill from September of 2008 and it’s paid. No missed payments on all of my new credit cards and car loan. Yet my credit score won’t go above 690. It just goes back and forth 5 points. I don’t get it.

    • http://www.Credit.com/ Gerri Detweiler

      Which credit scoring model is producing that score? Does it list top reasons for the score?

  • http://www.Credit.com/ Gerri Detweiler

    Thirteen percent utilization is very good. Honestly I am somewhat mystified. It’s hard for me to tell because I don’t know the details of your credit reports, but generally you are right–an old late payment shouldn’t bring the score down that much.

    • James M

      Well I just applied for a new Visa card and was approved online in about 30 seconds. I was given a $10,000 limit so I’m assuming my credit must be fine even though my score is showing low. I have contacted each of them asking why my score isn’t going up. Maybe they will get back to me with some useful information after the holiday. Have a great weekend.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team