Why Your Credit Score Fluctuates

Don't Be Surprised By Credit Score Changes

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If you regularly monitor your credit score, then you’ve likely noticed your score changing from one month to the next, sometimes even from one day to the next. There’s a simple explanation as to why your credit score fluctuates so frequently: because your credit report is changing.

Since your credit score is based directly on your credit report, it makes sense that your credit score would fluctuate as often your credit report changes. When you check your credit report manually, it might be hard to figure out what exactly caused your credit score to drop. Many credit monitoring services outline the most recent changes to your credit history, making it easier to figure out what affected your credit score.

Credit Scoring Background

Your credit score is a basically a numerical summary of your credit report data, but it’s based on a snapshot of your credit report at a single point in time. Your credit report data changes continually as businesses update your account information with the credit bureaus. On any given day, one or more of your creditors might send updates to the credit bureaus. Minor credit score changes usually indicate only minor changes to your credit report, something so small you might not even notice.

You might see bigger changes in your credit score if there were major changes to your accounts. For example, a late payment could cause a recognizable drop in your credit score. Understandably so, since your payment history is 35% of your credit score.

The other factors that influence your credit score are your level of debt (30%), your age of credit history (15%), a mix of accounts and recent inquiries (10% each). Knowing that, here are a few other things that could cause your credit score to fluctuate noticeably: a big credit card purchase, opening a new account, or the addition of a collection account.

Your credit score might increase, too. A decrease in your credit utilization, aging accounts, or deletion of negative information can all result in improvements to your credit score.

If you're watching credit score fluctuations, you have to make sure you’re looking at the same credit scoring model based on the same credit report. While you only have three major credit reports, there are countless credit scoring models based on those reports. It's tough to get a grasp on how your credit score moves if you use different credit reports or different credit score models.

The best way to track your credit score over a period of time is to use the same credit score from the same bureau every time. For example, services like CreditKarma.com and CreditSesame.com offer you free credit score monitoring so you can easily watch your credit score movement.

Should You Be Worried?

Small credit score fluctuations typically aren’t a big deal, especially if you’re not planning to apply for a credit card or loan anytime soon. However, an unexpectedly large drop in your credit score is worth investigating, even more so if you’re planning a major loan application in the coming weeks or months. A lower credit score can affect the terms you're approved for and can even lead to you being denied.

Review your credit report to see what’s changed recently. Has a late payment been added? Was one of your credit limits cut? Was an account closed? Have you recently applied for new credit?

Your credit score might unexpectedly drop when certain negative information falls off your credit report. You’d naturally expect your credit score to go up when negative information falls off your credit report. But, the loss of negative accounts could put you on a new credit scorecard, one where you don’t necessarily outshine other consumers like you. Keep making the right moves and your score should improve over time.

Unexpected fluctuations in your credit score could also be a sign of fraud or identity theft. Make sure that any major changes to your credit report information are changes that you made. Report fraudulent accounts to the credit bureau and the creditor.

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  1. myFICO. "What's in My FICO® Scores?"

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