Why has my credit score changed when I haven’t done anything?
You pay the same bills, have the same number of loans, and are continually responsible for your credit cards, but your credit score changes month to month. It may seem like a credit rating fluctuates up or down like the seasons, even though you apparently haven’t done anything to influence it.
Sometimes your score changes based on factors beyond your control, but most of the time your behavior influences your score in ways that may not be obvious. Let’s take a look at the factors that influence your score and some reasons why it might change even if you don’t think you’ve changed your behavior.
Why has your score changed?
Your credit score is calculated based on your payment history, the amount of money you owe, the length of your credit history, the type of credit you have and the new credit that has been added, so a change in your score means that one of these has changed.
Your credit usage has changed
Your credit utilization rate is the amount you owe on your credit card against your credit limit. This influences your credit score, so a change in either of the two can cause your score to adjust.
Have you recently charged more on your credit card? If so, your credit usage may have increased, which may negatively impact your score. As a general rule of thumb, using less than 30% credit usage (ie spending $ 300 or less if your credit limit is $ 1,000) can keep your credit in top shape.
Check to see if your credit card company has increased or decreased your total limit. Credit card companies will often tell you if you qualify for a change in the credit limit, but they might change it without your knowledge. If your spending habits stayed the same, increasing your credit limit would lower your credit utilization rate, which could have a positive impact on your score. A decrease in your credit limit would increase your utilization rate; thus, your score could drop.
Something has been recorded on your credit report
Think about your payment history – have you missed a credit card payment in the past few months? Have there been any bills that you may have missed in the past months?
Missed payments are usually not reported to the credit bureaus until they are at least 30 days late, so your score will not be affected until after that time. Your score will be affected by a payment more than 30 days late, but an overdue, referring to a payment more than 30 days late – 60, 90, or even 180 days – can devastate your score.
Derogatory marks such as tax liens, write-offs, collections, foreclosures or bankruptcies also have drastic impacts on your credit, and it can take weeks or months to show up on your report. If you have experienced this, your score may take a long time to change.
Something happened on your credit report
Fortunately, missed payments and derogatory notes won’t stay on your credit report forever. The older these scores on your credit score, the less impact they have, so you can see your score recover over time while keeping your behavior consistent.
Late payments over 30 days will stay on your credit report for seven years, while derogatory marks like bankruptcy can stay on your report for up to 10 years. Over time, your score will recover, and once these scores are removed from your credit report, you may see an instant increase in score.
There was a recent investigation into your report
If you’ve recently applied for a credit card or loan, the lender has likely pulled your credit report. This is considered a difficult investigation, occurring when a lender checks your credit to determine if they want to lend you money. These will temporarily reduce your score.
An account is closed
When you pay off a loan, your credit rating could be negatively affected. This is because your credit history is shortened and about 10% of your score is based on the age of your accounts. If you’ve paid off a loan in the past few months, your score may go down.
Your score could also be affected by a closed credit card. Not only would your credit history be shortened, but your credit limit would also decrease and your credit utilization ratio would be affected.
Often times, you are the one who authorizes the closure of a credit card, but the card companies may close them without your knowledge. the Equal Credit Opportunity Act allows creditors to close a card due to inactivity, default or default without notice. If they close an account for some other reason, they just need to give you 30 days notice after the account is closed, so you could have a closed credit card that you don’t even know about.
Should you be worried about changes in your credit score?
Changes in your credit score are completely normal, so there is no need to worry about small fluctuations! That being said, it’s good to check your credit report at least once a month so that you can track these changes when they occur.
You might want to take note of any significant changes in your score, as they could indicate that something bigger is going on – for example, if you have unauthorized accounts opened in your name or you have been the victim of identity theft.
The next time your credit rating changes, consider the following questions:
- Did you spend more or less money this month compared to previous months? If so, your credit utilization ratio may have changed.
- Have you missed a payment in the past few months? If this is the case, you could have an overdue payment which is hurting your score.
- Has a missed payment or a derogatory mark from several years ago fallen off your credit report? If this is the case, your credit score may increase.
- Have you applied for credit? A survey may have been placed on your report, which may negatively impact your report.
- Have you recently paid off a loan or closed a credit card? If so, your credit history may have been affected.
After taking a closer look, you may find that something has changed that could influence your credit score that you were not initially aware of. The best way to monitor changes in your score is to check your credit report every month, so that you are aware of any changes that are impacting your score. Sites like Rocket housesSM allow you to check your credit score and make a free report every two weeks!
Subscribe to Zing! Blog
Want to impress your friends and family with the knowledge we are going to pass on to you?
If so, sign up now to get Home, Money, and Life Tips delivered straight to your inbox.