Why Do Your Credit Scores Change?

Highlights:

• It's completely normal for your credit scores to change over time.
• Your creditors provide information to the three nationwide consumer reporting agencies (NCRAs). The NCRAs use this information to determine your credit scores.
• A variety of factors can cause changes in your credit scores.

Your credit scores are an important measure of your financial well-being. A lot of things influence your credit scores, like your payment history and the amount you owe. It's important to check your credit scores often, especially if you intend to buy a house or car soon. If you're tracking your credit scores, you may notice changes you hadn't expected. It's completely normal for credit scores to change. But why does this happen?

What factors determine my credit score?

Lenders use many different scoring models. In general, credit scores use the following factors to calculate credit scores.

• Payment history. Your payment history often has the most influence on your credit scores. These include on-time, late and missed payments.
• Used credit vs. available credit. This is also known as your credit utilization rate. This ratio refers to the amount of revolving credit you're using compared to the total amount of revolving credit available to you. Lenders and creditors like to see you use 30 percent or less of your total available revolving credit.
• Types of credit accounts. Lenders like to feel confident that you can handle a mix of different types of credit. This includes revolving debt, like credit cards, and installment loans, like student loans.
• Length of credit history. Credit scoring models often consider the age of your oldest credit account. The older an account is, the better credit score you may have.
• New credit. Lenders may also take into consideration any accounts you've opened recently.

Changes to these and other factors are what causes your credit scores to change. It's important to remember that credit scoring models vary. One model may place more importance on payment history, while another may not. So, it's not unusual for your credit scores to vary based on the scoring model used.

Why have my credit scores changed?

Your credit scores are a snapshot in time. They change based on the information on your credit reports. Lenders, collection agencies and other sources send information to the NCRAs. The NCRAs then update your credit reports. Several factors can change in your credit scores, many of which can occur without any action on your part. If your credit score has recently changed, consider the following reasons.

• You checked your credit score with a different NCRA. Your credit scores with each of the three NCRAs can be different. Some lenders report to all three NCRAs, but others may report to only two — or none at all. That means the information that each NCRA uses to calculate your credit score may differ. Plus, the three NCRAs use different scoring models to calculate credit scores. Even if your data is the same across the board, your credit scores may differ.
• Some time has passed. Even if there are no changes to your credit reports, the passage of time could change your credit scores. If you have a late credit card payment, for example, its effect on your credit scores may diminish over time. That doesn't mean that it's okay to make a late payment. One of the best habits you can get into is paying your bills on time every time.
• You made a payment. Making payments on credit accounts is a common cause of fluctuation in credit scores. Payment history is often the largest factor used to calculate credit scores. If you made payments on your credit cards or loans, this gets sent to one or more of the three NCRAs. This may cause changes in your credit scores.
• You paid down a debt. Your debt to credit ratio is the percentage of available credit you're using. It also factors into credit scoring and may cause your scores to fluctuate. If you paid down a debt, it may look favorable to lenders. But, if you completely paid off a debt, it may cause your credit scores to go down.

How often are credit reports and credit scores updated?

With credit reports, creditors usually report information to the three NCRAs monthly. But, each creditor may report the information at a different time. Because of this, you can usually expect your credit scores to update at least once every month. Your scores can update more often depending on how you use your credit accounts. You should also note that credit scores refresh at different times during the month. There may be times where it takes a few days or weeks before you see your updated credit scores.

How Equifax^® helps you track your credit

It's a good idea to check your credit scores to gauge your credit health. If you find accounts or balances you don't recognize, it could be a sign of identity theft. With Equifax Complete™ Premier, you can track and see changes to your Equifax credit report. You can also receive alerts if your personal information is at risk of being on the dark web. Your credit scores can change for any number of reasons. Knowing why your scores changed is important to reaching your financial goals.