If you’ve taken the advice of financial experts to check your credit score on a regular basis, you may have been surprised to see the numbers fluctuate from report to report. The changes may be confusing, especially when your score has fallen after you’ve worked so hard at raising it. But there’s a simple reason why your score fluctuates – credit reports aren’t stagnant but fluid.It changes to a greater or lesser degree depending on the way you’ve been using credit and how effectively you’ve been managing your finances over time.
Determining which elements of your report are affecting your score will take a bit of investigative work. The biggest fluctuations will be seen from the following actions:
- Payment History – Thirty-five percent of your score is determined by how well you manage credit accounts. Make you payments in a timely way and see a boost. Miss a payment, have an account go to collections, file for bankruptcy protection and you’ll watch your score take a dive.
- Amount of Debt – Thirty-percent of your credit score is determined by your total amount of debt. Use more than thirty percent of your available credit and you’ll see a drop in your score. See it rise again as you pay off your balances and use ten percent or lower of your total available credit.
- Account Longevity– This is one of the factors that’s hard to pin down. Providing fifteen percent of your score, older, well-maintained credit accounts are a positive indicator in the calculation, but there’s no way to know what affect it has from report to report. Just keep in mind that closed accounts lose their influence in ten years, so it’s wise to keep your older accounts active by using them occasionally.
Other factors that can result in credit score fluctuations include the type of accounts (installment, revolving, etc.), opening or closing accounts, and multiple inquiries by banks or financial institutions. So before you jump to the conclusion that something is amiss with the credit reporting agencies’ data, think about whether or not you’ve made a large credit purchase, opened a new account, had an account go to collections or were successful in removing a negative record from your credit report.
Your credit score is a snapshot of a particular moment in time; small changes are typically no big deal. If, however, you see a big drop that you can’t explain, request a copy of the associated credit report and review if carefully. Identity theft is often realized by conscientious consumers who recognize suspicious scores and reports. Keep making the right moves and your score should improve over time.