6 Factors That Can Cause Bad Credit

Get loans for bad credit in Canada - image for article 4993949

Your credit score is a number that lenders use to evaluate your creditworthiness. It is based on your credit history, which includes information about your credit utilization, payment history, credit mix, and length of credit history. The higher your credit score, the more likely you are to be approved for a loan or credit card with favorable terms. If you think your score has been impacted by high credit utilization, try a debt consolidation loan calculator to help you pay off the debt in no time.

Many factors can impact your credit score, including late payments, high credit utilization, and having a thin credit file. By understanding how your credit score is determined, you can take steps to improve it and make yourself a more attractive borrowing prospect.

Here Are The 6 Factors That Can Cause Bad Credit

  1. Not paying your bills on time

One of the biggest factors that can affect your credit score is whether you pay your bills on time. If you’re consistently late with payments, it will reflect poorly on your credit report and could cause your score to drop. This can include everything from credit card bills to your mortgage or rent.

  1. High balances on your credit cards

Another factor that can hurt your credit score is having high balances on your credit cards. If you’re carrying a lot of debt, it can be a red flag to lenders and cause your score to go down. If you max out your credit cards or regularly approach your limit, it will harm your credit score.

  1. Applying for new credit too frequently

If you’re constantly applying for new lines of credit, it can be a bad sign to lenders. They may see it as a sign that you’re in financial trouble and it could cause your credit score to go down.

  1. Closing old credit accounts

If you close an old credit account, it can hurt your credit score. That’s because it will lower your overall credit limit, which can lead to a higher credit utilization ratio.

  1. Having a bad credit history

If you have a history of bad credit, it’s going to be difficult to improve your score. Lenders will see that you’ve had past problems with debt and it could cause them to be hesitant to give you new lines of credit as a higher risk borrower.

  1. Not using your credit cards regularly

If you don’t use your credit cards regularly, it can harm your score. That’s because your credit utilization ratio will be low and it could cause your score to go down.

Bottom line

Several factors can lead to bad credit.  If you’re struggling with bad credit, there are some steps you can take to improve your situation. These include paying down debt, maintaining a good payment history, and using less of your available credit. By taking these steps, you can gradually improve your credit score and get back on track financially.

Interesting Related Article: “How can you access finance with bad credit?