Have you recently run your credit and found that your score is much lower than expected? Well, here are three of the most common reasons why that might be the case.

Foreclosure / Short Sale / Bankruptcy

If you’ve had any of the these in the past couple years, you can expect it to dramatically impact your credit score in a negative way. Because mortgages are typically the largest loan amount that someone has in their lifetime, when a person defaults on their mortgage it can disqualify them getting another mortgage for up to seven years, depending on the type mortgage they’re applying for.

Bankruptcies can also have a large negative impact on your credit scores and often prevent the applicants from getting a new home loan for several years. Typically, those who have experience a Ch.7 Bankruptcy for example will have to wait at least two years from the discharge date of the bankruptcy to apply for a new home loan.

Collections/Judgements

If you have any collections on your credit report that are not being disputed, these will most likely drag your credit report downward. If you are disputing a collection however, these credit lines are typically not included in the credit score you receive. However, if you plan on applying for a home loan, keep in mind that banks will typically want you to un-dispute any collections that appear on your credit report before funding a loan.

Credit Balances over 30% of the Line Amount

Having some credit debt can be good for your credit scores, however having too much credit debt in relation to your line amount can cause the credit scores to drop. The three credit bureaus (Equifax, TransUnion, Experian) will typically adjust your credit score lower whenever there is a credit line that has balance of over 30% of the line amount.

With this in mind, if you’re getting to apply for a home loan or are interested in purchasing a home in the near future, don’t completely pay off your credit lines to a zero balance. But rather, pay these credit balances down to under 30% of the line amount and you’ll have a better chance of getting a high credit score.