Published on Jun 24, 2024 5 min read

Understanding the Frequency of Credit Score Changes

Your credit score is an important aspect of your financial well-being, serving as a numerical indication of how reliable you are with credit. It is essential in many areas of your financial life, such as obtaining loans and securing competitive interest rates for credit cards. If you're curious about the frequency at which your credit score fluctuates, you are not the only one. Let's delve into the specifics to gain a better understanding.

Just imagine yourself in Addis Ababa, the vibrant capital of Ethiopia, for two days, without a care in the world about checking your credit score. However, in your native country, this numerical code is constantly changing as a result of your financial actions. Knowing the frequency of changes in your credit score can aid in better financial management, similar to preparing for a visit to a new city.

What is a Credit Score?

A credit score is a numerical representation of your credit risk, with a range of 300 to 850. Lenders find you more appealing if your score is higher. It is determined using your credit report, which holds details about your credit behavior, such as payment record, debt levels, and credit history duration.

Factors Influencing Credit Score Changes

Your credit score isnt static; it fluctuates based on various factors. Lets discuss each of them in detail.

Payment History: This is the most significant factor. Late payments can negatively affect your score, while consistent, on-time payments can improve it.

Credit Utilization: This ratio compares your current debt to your credit limit. Keeping your credit utilization below 30% is generally good for your score.

Credit History Length: The longer your credit history, the better. This aspect takes into account the age of your oldest account, the age of your newest account, and the average age of all your accounts.

New Credit: Opening multiple new accounts in a short period can lower your score.

Credit Mix: Having different types of credit like credit cards, mortgages, and loans can improve your credit score.

How Often Does Your Credit Score Change?

Your credit score can change as often as the information in your credit report is updated, which can be done daily. However, it's more common to see changes monthly, as most creditors report to the credit bureaus every 30 days. . Lets discuss each of them in detail.

Daily Updates: Some aspects of your credit can change daily. For instance, if you make a payment on a credit card that gets reported immediately, your credit utilization might decrease, potentially improving your score.

Monthly Reporting: Most lenders report your activity to the credit bureaus once a month. This is why you might notice your credit score changes once a month, especially after billing cycles.

Significant Events: Certain events, such as applying for a new credit card or closing an old account, can also trigger a change in your credit score. These events might not happen frequently but can have a noticeable impact when they do.

Monitoring Your Credit Score

Regularly monitoring your credit score is good practice. Heres how you can keep an eye on it. Lets discuss each of them in detail.

Credit Monitoring Services: Many services offer free credit score monitoring. These services provide alerts about significant changes to your credit score or report.

Annual Credit Reports: You are entitled to a free annual credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion). Reviewing these reports can help you identify and correct errors that might be affecting your score.

Financial Apps: Many financial apps now offer credit score monitoring as part of their features. These can provide you with real-time updates and tips on improving your score.

Improving Your Credit Score

Improving your credit score requires consistent effort over time. Here are some strategies to help boost your score:

Pay Bills on Time: Your payment history is a significant part of your credit score. Ensure you pay all your bills on time.

Reduce Debt: Work on paying down your credit card balances and other debts. Lowering your credit utilization ratio can positively impact your score.

Avoid New Credit: Limit the number of new credit accounts you open. Each new account results in a hard inquiry, which can temporarily lower your score.

Check Your Credit Report: Regularly review your credit report for inaccuracies. Dispute any errors you find, as they can unjustly lower your score.

Common Misconceptions About Credit Scores

Here are some of the common misconceptions about credit scores that you should be aware of. Lets have a look at each of them in detail.

Checking Your Own Score Lowers It: Many people believe that checking their own credit score will negatively impact it. However, checking your own score results in a "soft inquiry," which does not affect your score.

Closing Old Accounts Improves Your Score: Closing old accounts can actually hurt your score, as it reduces your overall credit history length and can increase your credit utilization ratio.

Keeping a balance on your credit card does not improve your score; contrary to popular belief. The most recommended practice is to settle your balance completely every month.

Conclusion

Understanding the dynamics of how often your credit score changes can empower you to manage your financial health better. Just as you would plan a trip to Addis Ababa by knowing the ins and outs of the city, planning your financial future requires knowing the factors that influence your credit score and how frequently it can change. Regular monitoring, responsible credit behavior, and staying informed about how your actions impact your score can help you maintain a healthy credit profile. Remember, your credit score is a living, breathing number that reflects your financial behaviorstreat it well, and it will serve you well in return.