Why your credit score is not improving despite timely bill payments

Applying for multiple credit cards or loans in quick succession leads to inquiries about your credit report

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When card customers pay their bills, they expect to see their credit scores steadily. However, some find it frustrating that their scores are stagnant despite responsible behaviour.

 

Here are key reasons why a customer’s credit score may not improve despite timely bill payments.

 

High credit utilisation: One significant factor is utilisation ratio, which is the amount of credit you are using compared to your total available credit.

 

Inaccuracies in credit reports: Credit reports are not infallible and inaccuracies can misrepresent your financial behaviour. Errors such as incorrectly marked defaults or outdated account closures can harm your creditworthiness. Regularly reviewing your credit report for inaccuracies and disputing any discrepancies is essential to maintaining a healthy score.

 

Limited credit mix: A well-rounded credit profile typically includes a mix of both secured and unsecured loans. Relying heavily on one type, such as personal loans or credit cards, without incorporating secured loans like mortgages can hinder your score.

 

Too many credit applications: Applying for multiple credit cards or loans in quick succession results in the so-called hard inquiries about your credit report. Each inquiry can slightly decrease your score as it signals to lenders that you may be desperate for credit.

 

Negative records: Even if you are currently making all payments on time, past negative records – such as late payments or defaults – can tell on your credit report for up to seven years. While their impact diminishes over time, they still contribute to a lower score until they are removed from the report.

 

Improving your credit score is achievable with the right approach. “There are certain simple steps like prioritising timely payments for your credit card bills loan and keeping the credit utilisation modest, ideally under 40 per cent. Users should keep a proper track of their credit products if they have multiple credit products, and ensure to pay them off in time,” said Prashant Kumar, founder of Kredit.pe.

 

For those seeking faster results, focusing on credit utilisation often yields the quickest impact. Reducing high balances can result in score improvements within one to two billing cycles, provided other factors remain stable.