Why Does Your Credit Score Go Up and Down?

Ever notice how your credit score goes up or down a few points every month?  Even worse, have you ever had your score just drop like a rock and you have absolutely no idea why?  Maybe you’ve been one of the lucky ones and seen a boost?   If you’re one of those people who gets their credit score emailed to them weekly or whenever there is a change, there’s no doubt that you wonder why it changed 2 points last week, or why it went up a point this week.  Every little score change makes you wonder… why doesn’t it just STAY THE SAME?

Actually, there are a lot of reasons why your credit score changes:

Your Balance Changes:  If you make a large payment (for example, with your tax refund), you might see your score suddenly shoot up like a little rocket (the larger the payment, the bigger the spike in your score).  Or, let’s say you make a large, new purchase, maxing out a credit card… you might actually see your score take a big nosedive.  That’s because your credit utilization goes up, leaving you less available credit.  This makes up about a third of your credit score, so keep your balances as low as possible.

You Apply for a New Credit Card:   Applying for a new credit card usually causes a hard inquiry on your credit file and this typically drops your score a few points for a short period of time.  This doesn’t make up a lot of your credit score, but if every point counts, don’t apply for new credit cards unless you really need them.

You Close a Credit Card Account:  Anytime that you close an old account, you shorten your credit history, which can negatively influence your credit score.  As tempting as it is, many experts now advise you not to close a credit card account unless you absolutely have to.

You Miss a Payment:  Missing a payment goes directly into your credit file and then stays there for seven years.  Since your payment history amounts to about a third of your score, missing just one payment can really drop your score and keep it down for a long time.

You File Bankruptcy:  Even though it’s usually a last resort, bankruptcy will have a very detrimental impact to your credit file. Therefore, it’s always wise to seek an experienced attorney to help you to make an informed decision before filing for a Chapter 7 or Chapter 13 bankruptcy. The statute of limitations for a bankruptcy can range from 7-10 years.

Your Identity is Stolen:  Unfortunately, by the time your credit score is affected by identity theft, it’s usually too late.  That’s why you need to regularly review your credit report and score.  You might even want to consider a paid subscription for identity theft protection.

Your Credit History is Short:  15% of your credit score is based on the length of your credit history, so if you’re just starting out, know that it’s going to take time to build up a strong credit history (and likewise, a strong credit score).

Believe it or not, over half of the population today cannot tell you if there has been a recent change in their credit score.  Don’t be one of those people – pay attention to your score, review it regularly, and investigate anything that you’re not sure about.

Here’s an Easy Tip to Get a Fresh Start on Your Credit

Looking for easy ways to get a fresh start on your credit?

While there is no true “easy way” when it comes to repairing your credit after a serious financial setback, there are ways that you can quickly raise your score a few points (or more).

First and foremost, you absolutely have to know your credit score!  And, I’m not talking about knowing your credit score at just one of the credit bureaus either.  I mean that you absolutely have to know your score at ALL three of the credit bureaus.  Why?  Well, even though it would seem that they should all have the same information, they don’t.  Your score can vary by up to 70 points or more at any one or all three of the big credit reporting companies.  So, while your credit may be fantastic at Experian, it may not be so great at TransUnion, or at Equifax, and if you were to need credit (say for a house or car loan), you don’t necessarily know which credit bureau they will use to check your credit.  Or, they may use all three.  In this day and age, you just don’t know.  So, before you do anything else – find out your credit scores.

Once you know your credit score, the next thing to do is to really review what’s on your credit report – I know they can be confusing at times, but take the time to figure out what everything on there means.  Inaccuracies on your credit report are more common than you think, and one mistake can cost you valuable points on your credit score.

Just a few months ago, a friend was refinancing her house, and a question came back about an old bill that had been paid off for several years, but was still listed as a delinquent account on her TransUnion credit report, even though it didn’t show up on either of the other two reports.  Unfortunately, the company doing the refinance on her house used TransUnion to check her credit score…even worse, it almost cost her the refinance on her house… and that could have translated into a loss of the $20,000.00 she was saving by refinancing at a lower interest rate.  Fortunately, my friend was able to quickly and easily file a dispute (online) against the creditor and the account was removed in less than three days.  Her refinance went through without a hitch.  (Her credit score quickly shot up a few points, too!)

So, don’t just know your score – unless you have perfect credit (and not many of us do), then study your credit report and fix any inaccuracy that you find on ANY of the three reports.

And yes, you probably will want to pay for the credit monitoring service offered at any of the sites you visit – but trust me, it pays for itself in the long run.

Here’s the site I’ve used for years, and they will let you look for free, but once you’ve looked, spend the money to protect your credit.  It is money well spent: