When Are Credit Scores Updated and What Triggers a Change?
Uncover the dynamics of credit score changes. Learn what influences its updates and how often your financial profile shifts.
A credit score is a numerical summary of an individual’s creditworthiness. This three-digit number plays a significant role in various financial decisions, influencing access to loans, credit cards, and even housing or insurance rates. Understanding when and why these scores change is fundamental for maintaining financial well-being. Credit scores are not static; they fluctuate as new financial information becomes available.
Sources of Credit Information
Data for credit reports and scores originates from entities individuals interact with financially. Banks, credit card companies, and other lending institutions serve as data furnishers. These entities regularly transmit information about account activity, including payment history, current balances, and credit limits, to the three major nationwide credit bureaus: Equifax, Experian, and TransUnion. This reporting typically occurs once a month, often around the billing cycle date, though the exact timing can vary by furnisher.
Other sources contribute to a credit report. Collection agencies may report delinquent accounts to the credit bureaus. Public records like bankruptcies are included in credit reports, reflecting significant financial events. The timeliness and accuracy of this data submission directly influence when and how credit scores can be updated.
How Specific Actions Impact Score Updates
Many financial actions trigger changes in credit reports and lead to credit score updates. Making on-time payments is a key factor in credit scoring, and creditors report payment activity monthly. If a payment is at least 30 days past due, it can be reported to credit bureaus, potentially causing a significant negative impact on a score. These late payments can remain on a credit report for up to seven years from the date of the delinquency.
Opening new credit accounts impacts scores. This action involves a “hard inquiry” on the credit report, which can cause a small, temporary dip in scores. The new account then appears on the report, and its balance and payment activity are reported by the lender, typically within the first statement cycle and monthly thereafter. Changes in credit utilization, which is the amount of revolving credit used compared to the total available, are usually reflected once creditors report updated balances, generally monthly. Paying down a credit card balance can lead to a score improvement once the lower utilization is reported.
Closing an account can affect the average age of accounts and credit utilization, potentially influencing the score once reported. Derogatory marks, such as accounts sent to collections or charge-offs, have a substantial negative impact and remain on reports for about seven years from the date of the original delinquency. Bankruptcy filings remain on a report for seven to ten years depending on the type. The impact of these negative items tends to lessen over time, especially if positive financial habits are consistently demonstrated.
Credit Bureau and Scoring Model Update Frequencies
Credit bureaus (Equifax, Experian, and TransUnion) receive data from furnishers. While they integrate this new information into their databases regularly, often daily or weekly, it does not mean a credit score is recalculated with the same frequency. A credit score is a snapshot based on the data available in a credit report at a specific moment.
New scores are calculated when a lender requests one or when an individual accesses their score through a credit monitoring service. Scoring models use the most current data from the credit report to generate an updated score. Therefore, while the underlying credit report data may change frequently due to varying reporting schedules from multiple creditors, a new score is only generated upon request. There is no single universal date each month when all credit scores are updated; it depends on when new information is reported and when a score is pulled.
Monitoring Your Credit Score Updates
Individuals can monitor their credit score updates and reports through several avenues. Federal law entitles consumers to a free copy of their credit report from each of the three nationwide credit bureaus—Equifax, Experian, and TransUnion—once every 12 months. These reports can be accessed at AnnualCreditReport.com, and consumers can currently get weekly free reports. Regularly reviewing these reports helps verify accuracy and track changes in account balances, new accounts, and payment histories.
Many financial institutions offer free credit score monitoring services to their customers. Third-party applications and websites provide similar services, often updating scores monthly or weekly. These services commonly provide a VantageScore or a specific FICO Score version, which may differ slightly from scores lenders use, as various scoring models exist. Utilize these resources to stay informed about changes and to promptly identify any inaccuracies that may require dispute.