Reasons for Credit Fluctuations
You are monitoring your credit scores every week and reviewing all the information. You are keeping your data in track but you may sometimes notice that your credit score from last week seems different from this week. It is better if the three-digit number you are facing is increasing but what if your credit score slowly declines?
There are certain reasons why your scores change every now and then:
1. Aging Negative Items in your Credit Score
Events such as bankruptcy, foreclosure, or late payments are examples of negative items that affect your credit score. These events remain on a credit file for a number of years. A late payment, for example, remains on a credit file for about seven years. As these events age and move into the distant past, however, the affect they have on your credit score diminishes. As a result, as these items age, all other things being equal, your score can go up.
2. Payment for Credit Cards
After selling some of her estate shares in Jakarta, Indonesia, Martha, has paid two of her credit cards, erasing her almost $15,000 debt to zero. Expecting her credit score to go up, she checks it every day. After a week or so, it still remains the same. She asked for a credit advice if she needs to file a complaint or whatnot. The same issue may be experienced by many other individuals.
It will likely take a month for the changes to reflect in your credit score. There are a lot of factors that can need verifying before your credit report can be updated. Credit scores are 100% dependent on the information in your credit reports, so even though your balances are zero today, your credit reports also have to reflect the zero balances in order for your scores to benefit.
3. Scorecard Hopping
Another explanation to changes in a credit score is that you may have been placed in a new scorecard. Scorecard hopping, as it has been tagged, occurs when FICO, places a new consumer to a new scorecard.
FICO, a software company trusted to measure the consumer’s credit risk, does not simply lump every consumer in the same pot. They evaluate us all in different scorecards. This is mostly done to clients who are mostly near bankruptcy. Sometimes, if you are lucky enough, you can be put into a better scorecard.
