Why Does My Credit Score Keep Changing?

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KEY POINTS

  • Your credit score isn't a number that's set in stone.
  • As you pay bills, open and close accounts, and make charges on credit cards, your score can fluctuate.


Credit score changes are normal -- so don't sweat it if yours keeps jumping around.

Your credit score is an important number -- it tells lenders and credit card companies how risky a borrower you are, which helps them make decisions about lending you money or giving you access to lines of credit. A higher credit score sends the message you're less of a risk, while a lower score sends the message that a given lender or credit card issuer may want to proceed with caution before extending credit to you.

It's a good idea to check your credit score before applying for a major loan, like a mortgage. And generally speaking, it's a good idea to know where your credit score stands.

But if you check your credit score regularly, you may notice the number fluctuates quite a bit. And if you have a bank account or credit card that notifies you of credit score updates, you might see that number change from month to month.

If you're wondering what gives, fear not. Credit score changes are normal. And if they're minor, they're generally nothing to worry about. It's only when your credit score takes a drastic turn for the worse that you need to start digging deeper.

Small changes can happen a lot

There are different factors that go into calculating your credit score. These include:

  • How timely you are with bills
  • How much available credit you use at once
  • How long you have credit accounts open for
  • How often you apply for new credit cards

As you make payments on your credit cards or loans, that activity gets reported to the credit bureaus, which could change your credit score -- for better or worse. Similarly, as you rack up balances on your credit cards against your spending limit, that too goes onto your record. And whenever you open a new credit card account, that gets reported as well.

Because paying bills, charging expenses, and opening new accounts are things you may do often (well, maybe not that often with regard to the latter, but on occasion), it stands to reason your credit score might fluctuate from one month to the next. Say you have a larger credit card balance that you racked up when some unplanned bills hit. If you manage to whittle it down nicely a month later, your credit score could rise. And if that balance then grows the month after that, your score could fall.

What’s more, when you apply for a new loan or credit card, it results in a hard inquiry on your credit report. A hard inquiry can result in a small credit score hit -- usually, around five to 10 points -- so that could explain why your score is different from one month to the next.

When credit score changes are more substantial

If you pay off a large credit card balance, it could result in a nice boost to your credit score. On the flipside, if you're late with a bill, it could cause a substantial drop in your credit score.

For the most part, you shouldn't worry if your score changes for the worse from one month to the next by a margin of five to 15 points or so. But if you see your score drop 80 or 90 points, that's more of a problem. In that case, you'll want to figure out why your score took such a hit.

Perhaps you have an outstanding bill you forgot about that's more than 90 days overdue. That's the sort of thing that might cause a major decline in your credit score. And it's also the sort of thing you'll want to rectify as soon as possible.

Your takeaway, however, should be that small credit score changes are normal. It’s annoying to see your score decrease by a few points from time to time, but if those drops are minor, they're probably not worth losing sleep over.

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