Like the weather, how often credit scores change can be frequent and unexpected. Checking your credit score and credit report can prevent you from getting caught in a personal financial downpour.
Meteorologists use satellites, radar, even balloons to prognosticate, but how is your credit weather predicted? Basically, your credit report illustrates your financial climate or history and uses advanced calculations to predict your credit score. The system that calculates what and how often your credit score changes is called FICO®. Developed by the Fair Isaac Corporation, this process results in a numeric score derived from your credit report.
Who, you might ask, is interested in your credit score and its ever-fluctuating changes? They are the three major credit rating bureaus or agencies:
The reason these credit scoring and reporting agencies buy your credit information is to stay continually apprised of your fiscal "weather." Equifax, TransUnion and Experian then sell your credit score to businesses like mortgage lenders, employers, insurers and credit card companies who want to know if someone is a good credit risk or the credit score equivalent of a thunderstorm.
Credit scores are active and can change as often as the wind. In fact, with the right circumstances, your credit scores can change daily! Since your credit score is inextricably connected to your credit report, it's wise to know what items on your credit report trigger negative and positive changes to your score. The following criteria are evaluated from your credit report in order of importance.
1) Your payment history (about 35%)Your credit score will be changed and updated almost at once when one of these criteria or actions alters. The key, however, is your credit report. Until your credit actions register on your report, your credit score will remain unchanged. Changes may take awhile to show up on your credit report but should not cause you to check it or your score less. The opposite is true because once changes show up on your report; they quickly affect your score.
Another important reason to check your credit report often is that each credit reporting agency evaluates your credit record with various procedures. For example, your credit history from Equifax may be calculated with a different time table, or could be more or less extensive or up-to-date than say Experian or Trans Union. As a result, your credit report or even scores will probably not be the same from bureau to bureau on any given day.
The good news is that unlike the weather, you can change your credit score and for the better! The more often you practice good credit habits, the more your credit score will improve - daily. Here are the keys to a sunny credit score:
Patience and consistent good credit behavior pay off. Your credit score is time-based and even though changes occur often, improving your score is gradual. As you demonstrate solid financial habits, time will be your friend because as it passes so does your prior credit report history. Past credit troubles fade from your credit reports which then are replaced by better credit scores.
CreditScoreCenter.org credit monitoring services can help you change, increase and keep your credit score high. Your good credit score could make it easier for you to get some of life's most important goals like buying a house, landing a good job or getting a new car.
