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

Quick Answer

While on-time payments are a big factor in your overall credit score, there are a lot of other factors that could contribute to you having a poor credit score. Identifying what’s causing your low score and working to improve it gives you the best chances of raising your credit scores.

Why Do I Have Bad Credit if I’ve Made On-Time Payments? article image.
Dear Experian,

Why is my credit bad? I pay everything on time.


Dear WOD,

There is more to having good credit than just paying all of your bills on time, although that is extremely important.

What Factors Impact Your Credit Score?

Your payment history—whether you have paid your bills on time or late—has the greatest impact on credit scores. However, it typically accounts for less than half of your score, usually between 30% and 40% of the total.

Several other factors also are critical to being a good credit risk and having good credit scores. Your credit utilization rate, also sometimes referred to as your debt-to-limit ratio, can also significantly affect credit scores (more on this below).

The length of your credit history is another factor. 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.

What Is a Credit Utilization Rate?

Your credit utilization rate is a comparison of your total balances to your total credit limits, expressed as a percentage. You can calculate that number by adding up all of your credit card balances and all of your total credit limits. Then, divide the total balance by the total limit and multiply by 100 to get a percentage.

A high credit utilization rate indicates you are overusing your credit and may be at risk of default, even if you haven't yet missed a payment. While you may be making the minimum payment each month, when you have very high balances as compared to your limits, just one unplanned event could cause you to default on your debts.

Credit scoring systems also look at individual accounts. A very high balance on even one credit card can indicate some risk, and can negatively impact credit scores, although less than your overall credit utilization rate. The question is, if one card is being charged to the limit, are the others soon to follow?

What if I Don't Have Enough Credit?

In some cases, being turned down for credit or services might not be the result of bad credit, but rather a lack of credit. A thin credit file typically refers to a credit history with fewer than five credit accounts. Most credit scoring models need at least one or two active credit accounts on a credit report to generate a credit score. They also typically require payment activity for three to six consecutive months.

Having a thin credit file can make it harder to qualify for credit and services when you need them. If you have a thin file, here are some steps you can take to make your credit history more robust:

  • Sign up for Experian Boost®ø. Experian Boost can help expand your Experian credit file by giving you credit for on-time utility, streaming service and even rent payments. The feature is completely free and can boost your credit scores quickly and easily by using your own positive payment history.
  • Apply for a secured credit card. Secured cards require you to put down a deposit, which typically acts as your credit line. Because the credit line is "secured," credit card issuers are more willing to provide these credit cards to those with little or adverse credit history. The issuer will usually report your payments to one or more of the credit reporting companies, helping you build credit.
  • Ask a close friend or family member to add you as an authorized user. As an authorized user on a credit card account, you can benefit from the primary cardholder's positive credit history. You can use the account to make purchases, but you are not responsible for making the payments. Not all lenders report their authorized-user accounts to the credit reporting companies, so check with the lender before requesting to be added to the account.

How Can I Find Out What Is Hurting My Score?

The best way to find out what is specifically affecting your credit scores is to get a free copy of your credit report and free credit score from Experian. Reviewing your credit history can help you understand what lenders are seeing when they look at your report and ensure that there are no surprises when you go to apply for credit. Ordering your free Experian credit score will provide you with a list of the specific risk factors that are currently impacting your score the most and enable you to focus on changes you can make to those factors that will help you begin to improve your credit scores.

The information you get from your credit report and score will empower you to create a plan to improve your creditworthiness over time so you can get the credit you want and at the best rates.

Thanks for asking.

Jennifer White, Consumer Education Specialist

How Good Is Your Credit Score?

300 credit score301 credit score302 credit score303 credit score304 credit score305 credit score306 credit score307 credit score308 credit score309 credit score310 credit score311 credit score312 credit score313 credit score314 credit score315 credit score316 credit score317 credit score318 credit score319 credit score320 credit score321 credit score322 credit score323 credit score324 credit score325 credit score326 credit score327 credit score328 credit score329 credit score330 credit score331 credit score332 credit score333 credit score334 credit score335 credit score336 credit score337 credit score338 credit score339 credit score340 credit score341 credit score342 credit score343 credit score344 credit score345 credit score346 credit score347 credit score348 credit score349 credit score350 credit score351 credit score352 credit score353 credit score354 credit score355 credit score356 credit score357 credit score358 credit score359 credit score360 credit score361 credit score362 credit score363 credit score364 credit score365 credit score366 credit score367 credit score368 credit score369 credit score370 credit score371 credit score372 credit score373 credit score374 credit score375 credit score376 credit score377 credit score378 credit score379 credit score380 credit score381 credit score382 credit score383 credit score384 credit score385 credit score386 credit score387 credit score388 credit score389 credit score390 credit score391 credit score392 credit score393 credit score394 credit score395 credit score396 credit score397 credit score398 credit score399 credit score400 credit score401 credit score402 credit score403 credit score404 credit score405 credit score406 credit score407 credit score408 credit score409 credit score410 credit score411 credit score412 credit score413 credit score414 credit score415 credit score416 credit score417 credit score418 credit score419 credit score420 credit score421 credit score422 credit score423 credit score424 credit score425 credit score426 credit score427 credit score428 credit score429 credit score430 credit score431 credit score432 credit score433 credit score434 credit score435 credit score436 credit score437 credit score438 credit score439 credit score440 credit score441 credit score442 credit score443 credit score444 credit score445 credit score446 credit score447 credit score448 credit score449 credit score450 credit score451 credit score452 credit score453 credit score454 credit score455 credit score456 credit score457 credit score458 credit score459 credit score460 credit score461 credit score462 credit score463 credit score464 credit score465 credit score466 credit score467 credit score468 credit score469 credit score470 credit score471 credit score472 credit score473 credit score474 credit score475 credit score476 credit score477 credit score478 credit score479 credit score480 credit score481 credit score482 credit score483 credit score484 credit score485 credit score486 credit score487 credit score488 credit score489 credit score490 credit score491 credit score492 credit score493 credit score494 credit score495 credit score496 credit score497 credit score498 credit score499 credit score500 credit score501 credit score502 credit score503 credit score504 credit score505 credit score506 credit score507 credit score508 credit score509 credit score510 credit score511 credit score512 credit score513 credit score514 credit score515 credit score516 credit score517 credit score518 credit score519 credit score520 credit score521 credit score522 credit score523 credit score524 credit score525 credit score526 credit score527 credit score528 credit score529 credit score530 credit score531 credit score532 credit score533 credit score534 credit score535 credit score536 credit score537 credit score538 credit score539 credit score540 credit score541 credit score542 credit score543 credit score544 credit score545 credit score546 credit score547 credit score548 credit score549 credit score550 credit score551 credit score552 credit score553 credit score554 credit score555 credit score556 credit score557 credit score558 credit score559 credit score560 credit score561 credit score562 credit score563 credit score564 credit score565 credit score566 credit score567 credit score568 credit score569 credit score570 credit score571 credit score572 credit score573 credit score574 credit score575 credit score576 credit score577 credit score578 credit score579 credit score