What’s Hurting My Credit Score And Why Is It Fluctuating So Much?

Fluctuations In Credit ScoreAnd just like that, I’m no longer in the 800+ credit score club full of beautiful people. As part of my mortgage application process, the bank had to pull my credit score. The big white envelope in the mail with the results reminded me of my college acceptance letter way back in 1994. When I opened it, I was disappointed to discover my credit score dropped to 790 from 805.

Since September, 2013 when I first broke the 800 credit score mark when I applied for my Barclaycard World Mastercard for travel and double the rewards points, I’ve done nothing different. Every single mortgage, utility, and credit card bill has been paid in full without fail. Actually, that’s not true. I was a week late on one credit card payment because I was traveling. I gave them a ring and they dropped the late fee and said no problem. (See: How Does A Late Credit Card Payment Affect My Credit Score)

So I wonder, what could have hurt my credit score in just six short months. Perhaps you, too, have seen a decline in your credit score without any apparent reason. Let’s think things through.

THINGS THAT ARE HURTING YOUR CREDIT SCORE

The following are the most common reasons why a credit score could suffer:

1) Late payment beyond 30 days. Paying a credit card bill, utility bill, or mortgage bill late, but within 30 days generally won’t hurt your credit score given vendors almost always have a grace period. Even if you pay beyond 30 days late, your vendor generally won’t report you. It’s when you’re past 60 days that vendors will start reporting your lateness to the credit agencies.

2) Non-payment of bills. If you decide to not pay at all, your credit score is obviously going to suffer even worse than if you are late. Lenders generally have different classifications of lateness where past 90 days late often equals non-payment and a write-off from the books.

3) Too many credit inquiries in a short period of time. If you decide to one day apply for 10 credit cards, a mortgage, and a car loan within a month period, your credit score will likely suffer given New Credit accounts for about 10% of one’s credit score decision. The theory is that a sudden surge in credit application shows either financial strains, a mismanagement of money, or both.

4) Credit utilization levels. If you’re suddenly maxing out all your available credit, there is a possibility your credit score could suffer. At the same time, having too much outstanding credit can also hurt your credit score, even if you don’t use any of it. The idea is that there is a theoretical maximum credit score amount one can have available, and the credit score can act as a warning indicator to lenders if you have too much.

WHY IS MY CREDIT SCORE FLUCTUATING SO MUCH?

Not every data element found in your credit report is updated daily, but over the course of time many items are constantly changing. Since credit scores are based upon the information found in credit reports on the day it is requested, it stands to reason that credit scores will fluctuate depending on the day it is checked.

Given there are three different scores, one from each major bureau: TransUnion, Experian and Equifax, there are variations in scores by each. Scores between the bureaus often differ by 30 to 50 points. My 805 credit score was from TransUnion, and my most recent 790 credit score was by Equifax. 

There are also such things as credit score “resellers” who often sell scores that are not updated from recent changes at the credit bureaus. Some even have their own formula, resulting in a different score based on the exact same data. This is common with lenders who do not buy scores directly from the three major bureaus, but from a third-party.

The bottom line: So long as your credit score is within your true range, don’t sweat it. An excellent credit score is anything above 760, for example. Whether you get a 760 or a 825, you’ll still get the lowest borrowing rates. But if you know you should have a 760+ credit score, but one credit bureau shows a 710 credit score, I would look into your credit report in more detail to see if there’s anything wrong. Anything under 720 is not considered excellent, but only good. An estimated 30% of credit reports also have errors.

RECOMMENDATIONS:

* Free credit score check: You can check your free TransUnion credit score for free here at GoFreeCredit.com. Roughly 30% of credit reports have errors that could seriously hurt your ability to get a loan. I had a $8 late utility payment on my rental for two years because my tenants did not pay when they moved out. I had no idea until I checked my score, by which time my credit score got knocked down from 760 to 660, denying my ability to refinance.

* Apply for a credit card. Thanks to new initiatives by the government, more and more credit cards are highlighting their clients credit scores. Discover credit card has a great feature where they highlight your credit score in the monthly statement. They also have a 90 day price match guarantee on all purchases.

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. says

    Wow Sam! Even 790 is really really good! I think you should consider doing some credit card churning to take advantage of your good score. Maybe take another vacation on points. We did this a while back and flew to Japan/China for free. We didn’t even see an impact on our credit score.

  2. ryan says

    Slightly off topic (only slightly). Can I transfer an unsecured personal loan (with Wells Fargo) to a credit card? I’ve never done a transfer before, but the loan has a high interest rate and even the 3% fee would be worth it if I can pay this sucker off early (which I plan to do).

    • says

      Doubt it. But credit cards to send you checks to write, so you can try it. There’s a cost usually to paying debt with a credit card. Either they don’t allow (like paying student loans with a credit card, or there’s a fee).

  3. says

    I never make a late payment and I own 11 houses right now. But my credit score is below 800 as well. I think the problem is I buy a lot of houses each year and every time my credit is pulled by the bank. I also had the notation that my balances on credit were too high, even though I pay my credit card off every month and have three cards I never use, not to mention a line of credit that is not used. I wonder if that line of credit shows it is not used to the credit reporting bureaus.

  4. says

    My score is very close to 800 so it would be nice to get there eventually but I know that, as you said, it’s the range that matters. If I stay in the high 700’s, nothing to worry about.

    I don’t really understand how the bureaus interpret a high number of inquiries as someone who needs money soon or is mismanaging their money. I would think that a person who has never had a late payment is trustworthy no matter how many inquiries they get. But that’s only about 10% of your score so it doesn’t hurt too bad.

    I’ve been denied a good credit card here and there because of a high number of inquiries, but have never had a late payment in my life thankfully. Just kind of annoying when that’s the reason for denial despite a stellar payment history.

    • says

      Surprising you’ve been denied more than one credit card with a high 700s credit score. It might have something to do with your income (transition between jobs for example). Were you in a funny place when you applied and got denied?

  5. says

    I try to check my credit score once a year or so (if I remember). Like you said, I don’t really sweat what the actual number is as long as it’s in the range I expect & there are no glaring errors on the report. People that get obsessed over raising their score from 800 to 810, or trying to achieve a “perfect” credit score are just wasting time IMO.

  6. JayCeezy says

    Some other possible reasons…
    1) decline in income level
    2) applied for a new credit line (credit card?); if you get approved, the institution looking at your new lower score will be aware that they might have to compete a little more for repayment. If you don’t get approved (for whatever reason, lower income, increased available credit ratio, etc.) that also has a negative effect.
    3) recent inquiries for credit reports. Even if you are shopping around for better rates, multiple inquiries have a negative effect.
    4) change in marital status or employment status; it takes one year for these changes to have a neutral impact, and potential lenders are looking for stability for a positive impact to the score.

    Bottom line, opening additional lines of unneeded credit and making multiple inquiries on the credit score may result in a decline of the score, neutral impact at best, never positive.

  7. says

    My credit score is not super high like yours. I just started building my credit 2 years ago. I had no loans or credit cards before summer 2012. I have been meaning to add a new credit card with a nice sign up bonus. Gotta stop procrastinating and do it.

  8. Ravi says

    Good summary there. I like your point about “buckets” where 760+ is excellent, 700-759 is “good”, and so on.

    I think the only time your credit score really matters is when you’re trying to get a mortgage, because you need the right profile to get prime rates. Even for credit cards, a “good” score will suffice (assuming you don’t actually carry a balance… which is not a good idea anyway).

    I think the last time I checked my score was between 740-760 (different bureaus), and I was satisfied.

    I’d like to be 760+, but I believe it should inch upwards with age and length of open accounts. Hopefully, a “good” score as well as the right type(s) of income and assets will be sufficient in the next few years if/when I decide to buy more property.

    • says

      Age cures everything in wealth and destroys everything in health. Might have to write a blog post with this title.

      Definitely get your score over 760. That really is where you’ll get the best mortgage rate.

      • Ravi says

        I know you’ve mentioned this somewhere before, but what age were you when you bought your first place in SF?

  9. says

    This is a really helpful post. Fortunately my credit score has been ticking upwards and is in good shape now, but I’ve always wondered what makes the scores fluctuate up and down. I didn’t realize that there are resellers and some calculate in their own way.

  10. Jason_in_Clearwater_Beach says

    I really appreciate my Discover card now because of their ‘Free FICO Score’ program. It saves me $$ from checking it manually.

    829 !!

    (said humbly) Does anyone have me beat?

      • Ravi says

        I might consider getting one Discover card just to get the free score updates. Maybe put one bill on autopay just to have a little activity so they don’t close the account. Short term hit for an inquiry, but long term benefits to have a consistent credit score update?

        I wonder how much it costs them to provide that info so often.

  11. says

    Yep this right here is the truth:

    “Age cures everything in wealth and destroys everything in health”

    The sad part is most people actually don’t save, so they face the burden of being out of shape and financially unstable.

    Credit scores are a bit useless for anything beyond a house so have to agree with the poster above. If you are timely and efficient with cards you get 2% cash back or better and you get to see your credit score increase over time as well.

    • Ravi says

      Ah, the pain of being young. Good for health, not so good for discrimination by the credit agencies. I should sue!

  12. says

    A credit score is not static. It moves a little bit from time to time particularly when you apply for credit. It is still in the “excellent” range and probably would not bother a bank. I suppose if there is a significant reason for the shift such as taking on another mortgage it would appear more justified.

  13. mary w says

    Credit card companies report the amount of your bill each month to the credit bureaus…even if you pay it off each month. So it you were at 80% utilization that would have an adverse impact even if you paid it all off when receiving the bill.

    If you’re getting a mortgage and a few extra point might help (e.g. close to but usually below 760) cut waaaay back on cc usage for a billing cycle or two. I think you could also pay it off/down on-line before the billing date with the same result.

  14. DivHut says

    I think people make too much of a big deal with their credit scores. One thing you have to realize is that credit scores are dynamic and not static. So just like your score can lose some ground over an application etc. so to it can gain points. People get so fixated on a particular number and think that it’s final when in actuality it is very fluid.

  15. says

    Our Discover It card gives us our credit score each month and ours has dipped to 793. Digging into it, it is because of the rolling balance that I keep on our rewards cards– we pay the statement balance each month, but always use them to gain rewards cash and I guess that is a slightly bad thing to the credit agencies.

    Before we go to buy a new house, I’ll just switch to our debit card for a few months prior to the loan process.

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