7 Signs You Have Bad Credit

Maybe you’re busy. Maybe you’re afraid of what you’ll see. Whatever the case, it can be all too easy to turn a blind eye to your credit report. Fortunately (or, perhaps, unfortunately), certain red flags can let you know that something is really amiss — and that your credit score has entered the danger zone. (Bad credit scores are generally considered scores below 600 on the common 300 to 850 scale.)

Here are a few ways to know you may have bad credit beyond looking directly at those three important digits.

1. A Loan Application Gets Denied

A loan denial is one of the quickest ways to learn that your credit is in rough shape, since a good credit score generally entitles you to affordable financing and an average one will often net you credit, but at a higher interest rate.

Fortunately, you should get an idea of where your credit stands shortly after you get turned down for a loan (though it’s a good idea to pull your credit immediately anyway). The Fair Credit Reporting Act (FCRA) requires lenders provide a copy of the report they used, along with an explanation, when a consumer is denied or offered adverse terms on a contract or loan.

2. Your Credit Card Issuer Won’t Lower Your APR (or Raise Your Limit)

A credit card issuer typically reviews your credit if you ask for a lower annual percentage rate or a credit limit raise on an existing account. So, if “you get turned down for some reason, it’s probably a sign that there’s something on your credit report that they have seen … that gives them a little discomfort,” said Bruce McClary, vice president of public relations and external affairs at the National Foundation for Credit Counseling.

3. Your Issuer Closes Your Credit Card

Issuers, too, are in the habit of conducting account reviews on their own from time to time, so, if you see a change in your credit card’s terms and conditions (like, say, your credit limit decreases), your score may have gone down. And if it’s fallen low enough, “they could close your account, particularly if it’s got a zero balance,” said Barry Paperno, a credit expert who blogs at Speaking of Credit.

4. You Get a Default Notice or Subpeona From a Creditor

Late payments are certainly going to hurt your score, but, by the time you’ve entered default, big damage is likely to have been done. The same rule applies if you’re being or were sued for an old debt.

“By the time you get a judgment you’ve probably entered default,” Paperno said. “You’ve probably gone to collections. Those are as bad as you can get.”

5. You’re Contacted By a Debt Collector

Lots of different items, including medical bills, unpaid utility balances or even gym subscriptions can wind up in collections. And these collections accounts will hurt your credit score, if the company who owns them reports to the three major credit reporting agencies. So, if bills start arriving in the mail or a debt collector comes calling, that’s your cue to check your credit, McClary said.

“You want to make sure the collections notice is valid,” he said, since sometimes scammers call or collectors have the wrong number. “One step in doing that is looking at your credit report.”

6. You Start Receiving Subprime Credit Offers

Credit card solicitations can wind up in anybody’s mailbox, but pre-approved offers from subprime financing providers, like a secured credit card issuer, payday lender or a car title loan company, may be a sign your score has dropped below a certain threshold — “especially if you’re somebody who’s used to being qualified for prime credit,” McClary said.

7. You Have to Put a Deposit Down on a Utility Account

Lenders aren’t the only ones who pull your credit — cellphone providers, insurers and even utility companies look at versions of your scores when determining whether to do business with you. So, if you have to pay fees or are offered less-than-stellar rates, your credit may to blame.

When it comes to utilities, “If they check your credit and require a deposit, your credit is probably bad,” Paperno said.

Has There Been a Mistake?

Keep in mind, your credit can be bad for a variety of reasons. While you may have committed a faux pas you weren’t aware of, there’s also a chance an error is weighing down your score (you can learn more on Credit.com about how credit report errors happen.) And something more nefarious could be afoot — a sudden drop in your score is a sign identity theft could be occurring.

To get a handle of what might be behind your bad credit, you should throughly check your credit. You can do so by pulling your credit reports for free each year at AnnualCreditReport.com and viewing your credit scores for free each month on Credit.com. If your bad score is valid, you can work to improve it by getting accounts out of default, paying down high credit card balances and limiting new credit inquiries.