How Often Does Your Credit Score Update?

When you are planning to make a big purchase, it can feel like your credit score is always looming and coming up in conversations. You may be making changes to your spending and savings habits in order to improve your credit, which makes it tempting to check your score as often as possible. But what if you see little change? Don’t be discouraged because credit scores are updated according to a range of factors, and changes may take a bit to show up. As you browse homes for sale in Clermont, FL, it’s important to understand how and when your score may change.

What Is a Credit Score?

First, it is important to know what your credit score represents and how to interpret the number you see. Credit scores are numbers between 300 and 850 assigned to an individual creditor and are meant to depict how trustworthy they may be when it comes to issuing new credit. The higher the score, the better a borrower will look to potential lenders.

Your score is based on a range of factors, with each weighted differently. The main things taken into consideration will be the number of open accounts, the total amount of debt compared to available credit, repayment history, and any negative marks like bankruptcy. These factors help show the probability that you will be able to repay debts in a timely manner. Each lender may have different classifications of what score is considered “good” or “bad,” but the general guidelines are as follows:

• Excellent: 800 to 850
• Very Good: 740 to 799
• Good: 670 to 739
• Fair: 580 to 669
• Poor: 300 to 579

The credit score model used most often is called a FICO score, named for the Fair Isaac Corporation that created it. Other scoring systems exist but are less likely to be used. There are also three main bureaus – Transunion, Experian, and Equifax – that track your credit history and create your score. Each bureau may have a slightly different score as they use different weightings for the factors involved.

It is also important to know that within each bureau, there are subsets of the credit scoring model used for different purposes. When a lender pulls your credit score to determine if they want to loan you money, they may see a different number based on the purpose of the loan and what factors matter the most. Credit cards, mortgages, and car loans all have different scoring models within each bureau.

Because you have three scores, one from each bureau, most lenders will use the middle score to determine if you qualify for certain loans. Different types of mortgages have federal credit score guidelines in addition to each lender setting their own minimums. For examples:

• Conventional loans have a minimum score of 620, though lenders may raise it if they choose.
• FHA loans require at least a score of 580.
• VA loans have a minimum score in the 600s, usually at 640, the same as USDA loans.
• A jumbo loan will usually require a score over 700.

Updates to a Credit Score

Any lending institution is required to report information on debtors to the credit bureaus, with information such as total credit limits, amounts owed, and payment history. Other institutions, like a bankruptcy court or student loan servicers, may also send this information to the bureaus. As new information comes in, your score is recalculated to reflect the information. The basic rule is that lenders must send each bureau information once a month, but some may send it more often.

Each lender has its own schedule for reporting information to the credit bureaus, but they are not usually required to report information to all three bureaus. For example, a credit card company may report to Transunion and Equifax, but not Experian, and stay within the rules. With most bureaus getting an update at least every 30 to 45 days, you should expect to see changes to your credit score at least that often.

Because every lender has its own cadence around reporting, it’s likely that your score will change on a more revolving basis as different lenders report information. Your credit score can change as much as multiple times per day.

When a lender pulls your credit score, they are pulling it at a single point in time, knowing there may be some fluctuation.

How to Improve Your Credit Score

While it’s normal for your score to fluctuate over time, you should focus on making decisions that will improve the score and avoiding anything that could jeopardize it. Not only does a credit score help decide if you can qualify for certain programs, but a better score may also mean you see other benefits like a lower interest rate on your home loan. Below are some ways you can improve your score and make a quick impact.

Pay your bills on time

Your payment history is the most heavily weighted element of your credit score, as it shows how reliable you are when making actual payments. Any missed or late payments can cause a large dip in your score as soon as they are reported, so avoiding these is the best thing you can do. Even if you can only make the minimum payment, set up autopay so that this happens every month without fail and you do not have a negative mark on your credit report.

Pay attention to utilization

Rather than the total amount you owe, a credit score considers what percent of your total credit line is currently available versus what you have used. Experts recommend about 30% of your credit as a good maximum for any given time to show that you are using your credit but not close to maxing it out. If you are close to the limit, you can also request line increases on credit cards to help lower your ratio.

Don’t close accounts

If you aren’t using a credit card, avoid closing it where possible. Doing so will lower the age of your credit and your available credit and can have a negative impact on your credit score. Instead, just avoid using the card and keep 100% of it as available credit.

Apply what you can

Certain lenders are required to report to credit bureaus and will show up in your score without you doing anything. But other payments that we make every month, which aren’t strictly credit, aren’t applied. That means that things like your rent, utility bills, and other payments you make reliably don’t reflect in your score. However, there are many online services that let you report this information so credit bureaus can take it into account.   

Limit hard inquiries

Your credit score doesn’t just look at the credit you have actually taken out--it looks at how often you are requesting new credit. When a lender makes a hard inquiry, they get access to your credit score, but it is reporting back to the bureau. This means you don’t want to request new lines of credit constantly. Credit bureaus also have some rules that allow you to avoid this- for example, FICO allows for a 45-day window where all mortgage inquiries are counted as a single hard inquiry so that you don’t have multiple pulls as you work with different lenders.

Pay balances in full

There is a myth that having revolving credit, or always keeping a balance on your card, is a good way to build credit. While having some balances is not necessarily a bad thing, it is also not necessary. If you can pay in full, do that as often as possible, and your score will reflect low utilization and a high ability to pay off debts.

How to See Your Credit Score 

A lot of budgeting and financial applications have functions that show you an estimated credit score, which can be a great way to get a sense of how yours may be rising or falling. But people who rely on these can sometimes be shocked when a lender does a formal pull and tells them a vastly different number. That’s because most of these apps are estimating, not pulling your actual credit score. However, there are laws in place to guarantee each creditor has access to their score.

A program called Annual Credit Report allows you to pull a free copy of your credit report from each bureau once per year. These show your entire credit history but not your score. You can use the report to look for any inaccuracies and dispute them or get a general idea of your history.

FICO itself and other websites offer access to your scores for a fee, but be careful to choose a reputable website when you do this. You can use the Consumer Financial Protection Bureau’s website for more resources.

If you are shopping for homes, a mortgage lender will usually be happy to share with you the score they get when they run an inquiry so that you are armed with that information moving forward.