Credit scores can change, and often do so daily. Knowing how scores are calculated and what can cause them to change will help consumers understand why their scores fluctuate.
Basics
Credit scores are numerical representations of a person's reliability as a debtor. High scores mean they are more safe to lenders, while low scores indicate more risk.
Score Calculation
Credit scores are determined using several factors regarding a person's credit transactions: payment history, total debt, length of credit history, mix of credit types, and new credit applications.
Reporting of Items
Your credit score is based on your credit report, which is a record of your credit transactions. Companies that maintain these reports rely on other parties to tell them what a consumer does, so they can be updated at varying times. Whenever a new item is reported, it will raise or lower a credit score.
Positive Effects
Paying bills on time, keeping credit cards debt under 30 percent of the credit limit, and not having too many credit lines open all tend to increase scores. These items can be reported at any time, thus causing a credit score to rise from day to day.
Negative Effects
Conversely, paying bills late, having too much debt, not having a long credit history, all can lower a credit score. When these items are reported to the credit bureaus by the creditor, they can cause a score to go down.
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