Is It Normal for Credit Score to Go Up and Down?
Understand why your credit score naturally fluctuates. Learn the underlying reasons for its constant movement and how to interpret these shifts over time.
A credit score is a numerical representation of an individual’s creditworthiness, typically a three-digit number ranging from 300 to 850. It helps lenders assess the likelihood of an individual repaying borrowed funds and making timely payments. Credit scores naturally fluctuate, reflecting ongoing financial behavior and reported credit activity.
Why Credit Scores Change
Credit scores are dynamic tools that provide a current snapshot of a consumer’s credit behavior. They are subject to regular updates based on new information reported by lenders. This continuous data flow means that even minor shifts in credit activity can lead to adjustments in a credit score. These fluctuations reflect the evolving nature of one’s financial interactions.
Key Factors Affecting Your Score
Several categories of information influence whether a credit score increases or decreases. These factors are weighted differently by credit scoring models, but all play a role in determining an individual’s credit standing.
Payment history is the most impactful factor, often accounting for approximately 35% to 40% of a credit score. Consistently making payments on time demonstrates reliability and tends to increase a score. Conversely, late or missed payments can significantly lower a score, with the impact becoming more severe the longer a payment is overdue or if an account goes to collections. A single payment reported 30 days past due can cause a notable drop in a score.
Credit utilization, which is the amount of credit used compared to the total available credit, is another significant factor, making up about 30% of a FICO Score and around 20% of a VantageScore. A low utilization ratio, considered to be below 30% across all revolving accounts, suggests responsible credit management and tends to benefit scores. High utilization indicates a greater reliance on borrowed funds and can lead to a score decrease.
The length of credit history also influences a credit score, accounting for about 15% of a FICO Score and a similar percentage in VantageScore models. A longer history with established accounts indicates more experience managing credit, which can positively affect a score. Opening numerous new accounts within a short period can temporarily decrease the average age of accounts, potentially lowering the score.
New credit inquiries, also known as hard inquiries, occur when an individual applies for new credit, such as a loan or credit card. These inquiries can cause a slight, temporary dip in a credit score, often by fewer than five points, and remain on a credit report for up to two years, though their impact on the score lessens after 12 months. Multiple hard inquiries in a short timeframe, particularly for credit cards, can signal increased risk and result in a more noticeable score reduction. However, multiple inquiries for a single purpose, such as a mortgage or auto loan, within a concentrated period (e.g., 14 to 45 days) are often treated as a single inquiry by scoring models to allow for rate shopping.
The credit mix, or the variety of credit accounts an individual manages, contributes to a smaller portion of a credit score, around 10%. This factor considers whether an individual has a blend of revolving credit (like credit cards) and installment loans (such as mortgages or auto loans). Demonstrating responsible management of different credit types can be beneficial.
How Scores Are Calculated and Updated
Credit scores are generated using proprietary algorithms developed by different credit scoring models. The two most widely recognized models are FICO and VantageScore, each with its own methodology for assessing credit risk. While both models consider similar factors, the precise weighting of these elements can vary, leading to slightly different scores from one model to another.
Credit bureaus—Equifax, Experian, and TransUnion—collect financial data from lenders, including banks, credit card companies, and other creditors. This information forms the basis of an individual’s credit report. As new data is reported, monthly or bi-monthly, credit reports are updated. This continuous update cycle means a credit score can change frequently as new account activity is reported.
Keeping Track of Your Credit Score
Monitoring one’s credit score provides insight into how financial actions impact creditworthiness. Consumers can access their credit scores through various avenues, including many credit card companies, banks, and free online credit monitoring services. These services provide regular updates and highlight the specific factors influencing any score changes.
Individuals are entitled to a free copy of their credit report from each of the three major credit bureaus annually through AnnualCreditReport.com. Regularly reviewing both credit scores and the underlying credit reports allows individuals to understand the specific actions that contribute to fluctuations and to identify any potential inaccuracies that may need to be disputed. This proactive approach demonstrates the direct correlation between credit behavior and score movement.