How Frequently are Credit Scores Updated?

Most people have heard of a credit score. They know there is a "magic number" that can affect their ability to get a loan or mortgage and the terms they will be offered if they are approved. However, they may not know how often this number is updated. Credit scores are fluid and change frequently because they are based on your financial information. That changes rapidly as you make or skip payment, open new accounts and do other activities. You can influence your credit score by some extent if you know how this works.

Explanation

Your credit score is a three-digit number that acts as an indicator of your credit worthiness. It is calculated via a formula that uses information on your credit reports. The most commonly used credit score formula was developed by Fair Isaac Corporation. It is known as the FICO score. Experian uses the FICO score, while TransUnion uses Empirica and Equifax uses Beacon.

Significance

A credit score is very significant because it can affect your ability to open credit card accounts or get other types of loans, such as car loans, personal loans and mortgages. It may also be considered by insurers and employers. If you have a low credit score, you may be unable to get credit. If you do, you will most likely pay a higher interest rate. A low score can also cost you a job or insurance policy approval. Your score can vary from month to month, so it may be high enough to qualify for a good interest rate one month, but negative information can bring it down by the following month and put you in a higher risk category.

Factors

Your credit score is influenced by a number of different factors, all of which are related to your financial history and current accounts and debt level. According to FICO, the factors with the most influence are your payment history for credit accounts and the amount you owe to your various credits. The number of accounts you have and your lines of credit also play a role. If you are late with your payments or open a signficant number of accounts in a short period of time, your credit score will be negatively affected very quickly.

Timeframe

Because the factors that affect your credit score can change so rapidly, the score is calculated every time someone requests it. However, your credit score is usually updated on a monthly basis so your score will not change over the course of a month even if it is requested by multiple parties. Once that time frame has passed and new information is placed on your credit report, your credit score will reflect it the next time it is requested. This is true for both positive and negative information.

Accuracy

Your credit score is only as accurate as the information on your credit report. You are entitled to one free copy of your report from each of the three major credit bureaus upon request every year. Get copies of your report and review them thoroughly for accuracy, especially if you plan to be applying for credit soon. Dispute any incorrect negative items, as they must be removed if the credit bureau cannot verify their accuracy. Once they are removed, it will have an immediate positive effect on your credit score because they will not longer influence it when it is calculated.