And 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 Discover It credit card 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.
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Updated for 2020 and beyond.