Since credit scores are now so integral in the daily lives of people, even playing a role in whether someone can get a job or a loan, there is a tremendous fascination with them and how often they change. There are actually many circumstances and factors that can trigger a credit score to change. Being aware of how and when credit scores can change makes a huge difference when it is time to look for a good loan or take advantage of a great offer.
Credit Reports and Credit Scores
Credit scores are tied to the activities on and changes made to a consumer's credit reports (which credit bureaus have on file). For instance: If someone shows a utilization ratio (the balance that a credit card company reports that a person has divided by their credit card's total available credit) of ten percent on their credit reports for this month, which is a drastic improvement from the previous month, then their credit reports will eventually show this change and report it positively. Then, when the person goes to view their credit score, they may notice a small change in it. Other activities reported on a person’s credit reports, such as paying bills on time, adding new accounts, paying off loans fully, and applying for credit cards can also cause a credit score to change.
Waiting For Change
Credit scores don't change at a fixed rate; when a credit scores changes, there is a trigger for the change. Even if someone checks their credit score at the beginning of the year and then checks it again at the end of the year, they may not necessarily see a change in the score (especially if they didn't open any new accounts, apply for new credit cards, or miss any payments on their bills). However, if he or she applies for a new credit card, then they are very likely to see a change in their credit score.
What Makes a Credit Score Change
As mentioned above, there are many factors that can cause a credit score to change. If a person is looking to promote a positive change in their credit score, the best courses of action they can take are: paying their bills on time, using thirty percent or less of their credit card’s total available credit, avoiding bankruptcy and other financial judgments, building credit with new credit accounts, and being vigilant about any incorrectly reported or invalid activity on their credit reports.
Paying Bills On Time
Paying bills on time for new accounts will likely boost a person's credit score because it is reported as positive activity on their credit reports. Eventually, a consumer may notice little to no changes in their credit score despite this, but making timely payments will always keep a credit at least stable.
Credit Cards
Credit card utilization ratio is an extremely important factor in a person's credit score and can easily raise or lower it. Consistently using and carrying a balance of thirty percent or less of a credit card's total available credit is ideal. If a person with little to no or bad credit recently opened a credit card account and their credit card company reported that they had a credit card utilization ratio of five percent, then that person would likely see a good increase in their credit score once reported to the credit bureaus. Even if a person already has an established credit history that is in good standing, they may still see an increase in their credit score if they continue to decrease their credit card utilization ratio.
Invalid, Inaccurate, and Old Accounts
A credit score will also change if an odd account "falls off" (is deleted from) a person's credit reports; this is normally due to the account reaching the maximum age that it can be reported on someone’s credit reports but may also be because the account's validity was disputed or the account's status was changed. If someone disputes the validity or reporting accuracy of an account on their credit reports and they win the dispute, the status will change (for example: "closed" for accounts that are no longer open or "paid in full" for accounts that are paid fully) or the account will be removed from the credit reports entirely. This usually causes a big, positive change in credit score. There may also be accounts on a person’s credit reports that are simply too old to be reported any longer without the companies reporting them violating laws. In these cases, the accounts are removed from the credit reports, and the consumer's credit score likely experiences an increase.
Things to Avoid That Can Change Credit Scores
There are many positive actions that can cause an increase in a credit score, but negative actions can cause a decrease. People should avoid missing payments on their bills, using their credit cards without keeping their balances low, applying for too many new loans and credit lines, mishandling money, and going too long without checking their credit reports. When these things are avoided, a credit score will at least stay consistent and may even increase.
Final Credit Score Thoughts
Credit scores don't always change often or by much, so no one should feel discouraged if they are not seeing changes that are big or any changes at all. If a person wishes to see positive changes in their credit score, they should check their credit reports at least once every year, keep their accounts current, and continue to build up good credit. Even if their credit score doesn't change, they will at least have peace of mind in knowing that they are making positive strides that keep their score stable.
