Feb
26
2014

Utilization rate may be cause for lower scores when you have few accounts or low credit limits

creditscores

 

Dear Experian,

I only have one debt which is less than $1,000. I also have two credit cards. Together they have a balance of about $2,000 each month, but I pay them off monthly. Why isn’t my credit score higher?

- KCE

 

Dear KCE,

It may be that you have low limits on your credit cards so that your monthly spending is causing you to have high utilization. If so, you might consider applying for additional cards to add open credit lines or asking your current card companies to raise your limits.

Remember that a score is only created when you apply for credit, so if utilization is your problem, then simply make minimal charges on your card for a couple of months before applying for new services. That will lower your utilization and very likely produce a higher score. You are using your cards wisely by paying in full each month, so you can go back to enjoying that benefit after you receive your new service.

If it is not your utilization, then it’s difficult to speculate on the credit scores you received based on the very limited information you provided in your question.

Credit scoring systems can consider hundreds of factors from your credit history when calculating a score. They will weigh your payment history, utilization rate, length of your credit history, the kinds of credit you have, what you’ve done recently with credit and many other details.

When you obtain a credit score, you should also receive a list of the risk factors that most influenced that score. The best way to improve your credit scores is to focus on those factors.

You might consider purchasing an Experian Credit Educator session. A session includes a credit report, credit score, risk factors and a call with a trained representative who will walk through your credit report line-by-line and answer any questions you have about the report and the risk factors you received.

Thanks for asking.

The “Ask Experian” team

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