Q&A: Credit score changes

Dear Liz: My Discover card started including a complimentary credit score with my statement. My first report was 840. Each month since has been lower.

Two months ago it was 812 and the last one was 800. I have not applied for any new loans, cards or other credit. My limit on this card is $4,000, and I never charge more than $500 each month, which is paid in full. Why does my number keep dropping when I’m doing nothing different?

Answer: You may not be doing anything different, but the underlying information used to create your credit scores changes all the time.

The company that creates the leading credit scoring formula, FICO, says 8 of 10 people experience changes to their FICO scores by up to 20 points from month to month.

One factor that typically changes: the balances reported by your creditors. The fact that you pay your credit card in full is wise, but irrelevant to your scores.

The balances transmitted to the credit bureaus and used to calculate your scores may be the balances from your last statement, or from a random date in the previous month. If you have other credit accounts and loans, the balances from those factor into your scores as well.

Other things can also change. For example, an old, closed account may “fall off” your credit report, which could affect your credit utilization (how much of your available credit you’re using) as well as the average age of your credit accounts.

Also, every month your active accounts get older, which is typically a positive factor.

So you’ll see changes even when you’re looking at the same type of score from the same credit bureau.

You would see even more variation if you could see all your scores, since lenders use various formulas and pull scores from three credit bureaus.

Although the FICO score is the leading formula, that doesn’t mean the FICO you’re seeing is the FICO a particular lender is using. The lender may use a newer or older version of the formula — or one tweaked to the auto lending or credit card industry, for example.

You don’t have much to worry about, in any case. Scores over 800 indicate that you’re quite unlikely to default, so lenders should give you their best rates and terms if you do decide to apply for credit.

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