Dear Credit Card Adviser,
My FICO credit score keeps going up and down. I pay most of our bills with the card I have had for well over 10 years. The card is paid off every two weeks. I am never late on any accounts. I have no debt other than my house, which will be paid off this year. I monitor my accounts for fraud. Why is my FICO credit score like a bouncing ball?
It seems like a credit score should stay the same if your habits don't change. But the reality is your credit history that is used to calculate your FICO credit score is always changing, if just a little bit. And that could account for the changes, up or down, you see in your credit score.
FICO credit scores are generated anew for each credit score request, so a lender receives the most up-to-date credit score available. The score is based on the person's credit report from one of the three credit reporting bureaus -- Equifax, Experian or TransUnion. These reports are updated frequently with new information from your lenders, such as recent payments, credit inquiries and new balances. FICO calculates the score based on the most recent information available.
Even if you don't open a new credit card or fall behind on your car payment or make any other big credit move, your credit file is still changing. Consider these scenarios.
- Each time you make a payment on your mortgage, you reduce the amount of overall debt you owe, one of the factors used to calculate your credit score. This could bump up your score.
- FICO not only considers if you paid your credit card bill on time, but also the balance on your credit card statement. If that balance fluctuates, it affects your utilization rate, or the percentage of available credit you use. If you spend more in one month and use 75 percent of your credit limit, then that could pull your credit score down. If you charge only 20 percent of your limit the next month, that could boost your credit score.
- Old, negative history falls off your report after seven years (10 years for bankruptcy). That means your credit score will benefit when any old delinquencies or other negative items disappear from your credit files. The impact will be small, but could account for tiny fluctuations in your credit score.
Overall, about a quarter of people will see their credit score shift up or down by more than 20 points versus the previous three months, according to Anthony Sprauve, the spokesman for myFICO.com, the consumer education arm of FICO. Seventeen percent of scores move that much each month. Lower credit scores tend to vacillate more, mostly moving lower, while higher credit scores generally remain more stable over time, Sprauve says.
"I can't say what would cause the fluctuation," he says. "That is an individual situation."
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