Your credit reports and scores can change as new information is reported by your creditors. This is important to know as your credit reports and credit scores are what lenders use to help determine whether or not to extend you credit and with what terms. What your credit report reflects today might not be the same in a few days, weeks or months from now.
How Long Does It Take for Your Credit Report to Update?
Typically, creditors report consumer credit information to credit bureaus each month. Every time a credit bureau receives new information from one of your creditors, it updates your credit report.
Because creditors and lenders have different billing cycles and payment due dates, their reporting times can also be different. This means as creditors update specific dates on your report, your credit information can change multiple times throughout the month.
Of course, updates to a credit report may not happen on-the-spot. Credit bureaus evaluate the information before posting it to your credit report. In some instances, a credit bureau may have to verify what was reported if it seems like it might not be accurate, which can cause a delay.
Finally, since there are three different credit bureaus, TransUnion®, Equifax®, and Experian®, not all information is disseminated identically across all three. Some bureaus will receive data before the others, and some may not get the same data as the others at all.
How Often Do Your Credit Scores Change?
Your credit scores and credit reports are connected. For example, when a lender makes a credit inquiry to one of the credit bureaus — Equifax, Experian or TransUnion — the data on your credit report is calculated in real-time, which generates your credit score.
But your credit scores can change even if none of the items in the underlying credit report have. Time is a factor in credit score algorithms, which means that credit scores can fluctuate up or down as credit accounts age, even if no other information has changed regarding a consumer’s credit.
Because of differing reporting times and different score models, a score can differ from one report to the next. Accordingly, due to account aging or other changes, a score used for one credit application may differ from another application made at a different time or through a different bureau.
What Causes Credit Score Changes?
If you practice responsible credit behavior, any changes that occur in your credit reports and scores should be gradual. However, there are some things that can cause your credit score to fluctuate dramatically.
Late payments can happen to anyone and going a few days — or even a couple of weeks — past your due date won’t necessarily affect your credit score. It’s when your payment is 30 days or more late that your creditor is allowed by federal law to report it to the credit bureau.
Late payments added to your credit report can cause substantial dings to a credit score — and the longer they remain delinquent, the more damage they can do.
2. Credit Utilization
The amount of credit you’re utilizing in relation to your credit limit can also impact your credit score. For example, if you have $5,000 in available credit but have already charged $4,500 of it, your credit score may reflect that fact negatively. Likewise, if you pay off a credit card with a high balance, your credit score can improve. Charging and then paying off debt–and maintaining a stable credit utilization–can help you maintain a good score.
When you apply for credit, the lender will initiate a hard inquiry. If you apply for a couple of credit cards, a car loan and a mortgage loan, each one will be considered a hard inquiry. Multiple hard inquires, especially within a short timeframe, will have a negative impact on your credit score.
4. Closing Credit Accounts
The type of impact closing credit accounts can have on a credit score depends on whether the account has a considerable amount of open credit or not.
If the account does have a substantial amount of available credit, closing it could alter the credit utilization ratio. This could make it appear as if you are using more of your available credit than before. Utilizing more than 30% of your total credit limit can have a negative impact on your credit score. Note: closing older credit accounts can also shorten your credit history – and when it comes to your credit age, older is better.
5. Collection accounts
When you’ve failed to make payments on a debt for 180 days, your creditor may write off your debt as a loss and assign or sell it to a collection agency that will try to collect the debt owed.
Either your former creditor or the collection agency will report the collection account to the credit bureau. Having a collection on your credit report will lower your credit score
6. Accounts falling off report
Accounts with a late payment status, or those that end up in collections, have the most negative impact on your credit score when first reported. Over time, the impact will lessen. The statute of limitations for negative accounts and collections to remain on your credit report is seven years. After seven years, they should fall off your report. If you still see a negative account or collection on your report that is over the seven-year time limit, you may want to file a dispute with the credit bureau to have it removed.
When you file for bankruptcy, it can have a lasting negative effect on your credit score. A Chapter 13 bankruptcy remains on your credit report for seven years, whereas a Chapter 7 bankruptcy stays three years longer, for ten years. Again, when these entries age-off your credit report, you may see an increase in your credit score.
Monitoring Your Credit Reports and Scores
It’s a given that the information on your credit reports and your credit scores will change. ScoreSense can help you keep tabs on your credit by providing you with your credit reports and scores from all three credit bureaus, something other credit score providers lack. Daily monitoring, alerts and monthly updates from all three bureaus are also included. Are you ready to start keeping tabs on your credit? Let us know in the comments.