Good Credit, But Bad 540 Credit Score

by Rebecca
(TX)

Question: I've had some bad stuff on my credit, but got it all cleaned up. The ONLY thing I have on my credit report is my car and a credit card.

I'm building the credit card back up to max limit so it's not stuck at the bottom and dragging down my score. However, I can not get my credit score up over 540 and I can not figure out why!

I had some furniture financed but paid it off, early at that, thinking it would boost my score. it brought it up 5 points.

Why won't my score go up???


Answer: Hi Rebecca,

The first thing that came to my mind was that you had cleaned up your credit by paying off accounts, but the collections were still reporting, but showing as paid.

I see where you are saying the ONLY thing still on your credit, so I am assuming that the collections are completely gone and don't exist (whether paid or not) whatsoever on your credit report?

If they are completely gone, then the next thing that I'm thinking is that either the car, the current credit card or your furniture loan were paid slow (over 30 days late) somewhere in the last year.

If that is the case, then you will have to give your score some more time to go up. Even though those slow pays may have been let's say 6 months ago, they will drag on your score some.

The next thing is your credit card. I'm a little confused based on the wording you used, but am assuming you are saying that you are near your limit (almost maxed out) and are trying to pay your card down. If that is the case, you'll want to get it paid down below 35% of the limit to get the most benefit.

On top of all those possibilities, it sounds like there is not much depth to your credit. You mentioned that you paid the furniture loan off early, which probably didn't help your depth (amount of time with credit) much.

When someone has what is called a "thin file" (not much depth), then every little thing that can go against you goes against you much harder than someone with 20 well paid accounts over a 10 year period.

Overall, I'd say that your credit depth and some sort of negative (whether paid or not) is what is causing you the most problems and keeping your credit score at 540 and below.

Unfortunately, there is no other cure for depth than time and more well paid accounts.

Let me know if I missed something or if you have more to add...Hope this helped...

Justin