Why Do Credit Scores Change?

Reading time: 3 minutes

Highlights:

• It’s completely normal for your credit scores to fluctuate
• Information in your credit reports is updated as it is reported to credit bureaus
• The passage of time can also cause changes in credit scores

If you’re tracking your credit scores over time, you may notice the three-digit numbers may change, even if the credit score is generated by the same credit bureau or company.

It’s completely normal for credit scores to change. But why does this happen? Here are a few reasons:

Changing information on your credit report

Your credit scores are a snapshot in time that changes based on your credit behaviours and the information in your credit reports, which is updated regularly. Credit scores are calculated based on information in your credit reports. That information is updated as new data is reported to credit bureaus by lenders, collection agencies, or other sources.

That data could include balance changes, the opening of new accounts, payments on existing accounts, or closed accounts falling off your credit report after a period of time has expired. If you check one credit score in January and then again in March, for instance, the credit score may have changed based on changes in account activity reported to the two nationwide credit bureaus – Equifax and TransUnion -- during that time. 

Differences among credit bureaus 

While a credit score from one of the two credit bureaus may rise and fall, you may also see differences in credit scores furnished by the other bureau.

Some lenders and creditors report to both nationwide credit bureaus, but others may report to only one – or none at all. That means information that each credit bureau uses to calculate your credit score may differ. In addition, there are different scoring models used by credit bureaus and by companies to calculate credit scores, so even if your data is the same across both nationwide credit bureaus, the credit scores may differ.

It’s about time 

Even if there are no changes or updates to your credit reports, the passage of time could cause fluctuations in credit scores. If you have a late credit card payment, its effect on credit scores may diminish over time. That doesn’t mean that it’s OK to make a late payment. One of the best habits you can get into is paying your bills on time every time.

Payment history 

Making payments on credit accounts is a common cause of changes in credit scores, as payment history is typically the largest factor used to calculate credit scores, depending on the credit scoring model used. If you make payments on your credit cards or installment loans, your payment history may be reported to credit bureaus, which may cause changes in credit scores.

Debt-to-credit ratio 

Your debt-to-credit ratio is how much of your available credit you’re using, and it also factors into credit scores and may cause credit scores to fluctuate. For instance, if your credit card balances change month to month, and the amount of available credit you’re using changes, you may see fluctuations in credit scores as well.  

Payments may also impact your debt-to-credit utilization ratio and may also cause credit scores to change. Your debt-to-credit ratio takes into account all of your available credit versus the total of all your balances owed.

Different credit scoring systems 

There are many different credit scoring models, and lenders and creditors may use different scores to help decide whether to grant you credit. They may also consider other factors, such as your income. 

While credit score changes are normal, it’s important to ensure the changes don’t result from inaccurate or incomplete information on your credit reports. It’s a good idea to regularly review your credit reports from both credit bureaus. Make sure your personal and account information is correct and complete and there are no accounts or balances you don’t recognize. If you find something you believe may be inaccurate or incomplete, contact the lender directly. You can also file a dispute with the credit bureau reporting the information.