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The frequency with which your credit score changes is a product of the frequency of the changes in your credit report. Because your credit score is based upon the information in your credit report, updates to your credit report can change your score. Some of the changes that trigger a score change are monthly updates from lenders, closing or paying off accounts, applying for or opening new accounts, aging of data, information removed or added, change in credit card balance, or new negative information.
Monthly updates from lenders
Lenders report your active accounts to the credit bureaus once every month. This includes the amount you owe, the credit limit or original loan amount, date the account was opened, and how you pay your bills, such as on time, 30, 60, 90 or 120 days late. Each lender reports at different time frames, so updates can occur daily. Updates can impact your score either direction depending upon the nature update.
Closing or paying off an account
Closing a credit card account will usually impact your credit negatively, because you have lowered your available credit. Paying off an installment loan such as an auto or mortgage loan will have little of any impact.
Applying for new accounts and opening new accounts
Applying for new accounts and opening new accounts are both considered negative and will have a negative impact, but not major and only a short time. Inquiries for credit are only counted for the first 12 months.
Aging of data
Older negative data has lesser impact on your score as it ages.
Information removed or added
Negative payment information remains on your account for seven years. Most collections and public records are removed after seven years. Accounts that have been recently charged-off, sold to collection agency, foreclosed or filed for bankruptcy have the most negative impact.
Change in credit card balance
Increasing or decreasing the amount you owe on a credit card account, can impact your score, depending upon the magnitude of the change. The more of your credit you use, the more it impacts your score negatively. It indicates that you are using more of your available credit and are a credit risk.
Bad Stuff!
Paying a bill late when you haven’t been late previously, will have a negative impact. Failure to pay on an account for many months will have a major impact.
There are many factors that can change your score. You could go crazy trying to keep up with changes to your credit score. You need to review your credit report at least annually for accuracy. If you are paying your bills on time, keeping your credit card balances low, and not opening or closing accounts you don’t need, your score won’t change that much.
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Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, founder of www.creditexpertwitness.com and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. You can follow John on Twitter here.
