Why Do I Have Bad Credit if I’ve Made On-Time Payments? - Experian (2024)

FAQs

Why Do I Have Bad Credit if I’ve Made On-Time Payments? - Experian? ›

A short credit history gives less to base a judgment on about how you manage your credit, and can cause your credit score to be lower. A combination of these and other issues can add up to high credit risk and poor credit scores even when all of your payments have been on time.

If you repay a balance in full, it can impact your credit score, as your credit utilisation ratio will change, and the mix of credit accounts you use and manage on a regular basis may change too.

Using more of your credit card balance than usual — even if you pay on time — can reduce your score until a new, lower balance is reported the following month. Closed accounts and lower credit limits can also result in lower scores even if your payment behavior has not changed.

There are lots of reasons why your credit score could have gone down, including a recent late or missed payment, an application for new credit or a change to your credit limit or usage. The most important information to understand about credit is the factors that go into your scores.

Many factors contribute to a low credit score, including little or no credit history, missed payments, past financial difficulties, and even moving home regularly.

Credit scores from the three main bureaus (Experian, Equifax, and TransUnion) are considered accurate. The accuracy of the scores depends on the accuracy of the information provided to them by lenders and creditors.

When you check your own credit report or request your own credit score, or when a monitoring service you authorize does so, that request is noted on your credit report as a soft inquiry. A soft inquiry never has any impact on your credit scores.

Credit scores can drop due to a variety of reasons, including late or missed payments, changes to your credit utilization rate, a change in your credit mix, closing older accounts (which may shorten your length of credit history overall), or applying for new credit accounts.

A very common, yet not entirely obvious cause, for a score to drop is an increased utilization ratio. An increased what ratio? Yes, this is credit scoring lingo, but it basically measures how much of your credit are you using in relation to your total available credit.

Is Experian or FICO more accurate? ›

Simply put, there is no “more accurate” score when it comes down to receiving your score from the major credit bureaus.

Although there isn't a bank that exclusively uses Experian, some banks that typically use Experian data more commonly include American Express, Bank of America, and Wells Fargo.

You'll typically need a credit score of 620 to finance a home purchase. However, some lenders may offer mortgage loans to borrowers with scores as low as 500. Whether you qualify for a specific loan type also depends on personal factors like your debt-to-income ratio (DTI), loan-to-value ratio (LTV) and income.

Why is my credit score different between Experian and Equifax? The differences between Experian credit score vs Equifax credit score are due to the different algorithms used by them. The exact credit scoring formula employed by either is not publicly available.

Highlights: While older models of credit scores used to go as high as 900, you can no longer achieve a 900 credit score. The highest score you can receive today is 850. Anything above 800 is considered an excellent credit score.

Paying bills on time leads to an improved credit score, and an improved credit score leads to lower monthly payments when it's time to take out a loan. Whether you're buying a car or getting a mortgage for a house, you can get better interest rates with a higher credit score.

Why did your new mortgage drop your credit score by 100 points? Your new mortgage can cause your score to drop because it's a new account and likely a significant debt added to your credit history. Once you establish a positive payment history, your score will likely increase.

So the longer you pay your bills on time, even after having late payments, the more potential for your FICO Scores to increase.