Tracking your credit scores closely has become a much easier task than in the past. There is no shortage of websites that will allow you to access your credit scores completely free of charge. There are also other services that will grant you monthly access to your credit reports and scores for a fee. In addition to these sources, many credit card issuers will now even share one of your FICO or VantageScore credit scores every month.
As a result of this easy access to your credit data many consumers are beginning to keep a closer eye than ever before. However, if you start to monitor your credit from month to month you may begin to notice some periodic fluctuations in your credit scores – fluctuations that can sometimes be quite frustrating if you do not understand the reasons why your credit scores changed to the negative.
If you are making an effort to improve your credit scores, perhaps in anticipation of applying for a mortgage or another type of loan, it can be maddening to make a series of what you believe to be positive financial moves only to discover that your scores decreased from the previous month. This phenomenon is more common than you might think and as a credit expert I am constantly asked a question that goes something along the lines of “John, I made “X” positive changes on my credit reports but my credit scores dropped. What gives?”
There are many reasons why your credit scores could have fallen from one month to the next. Naturally, if new derogatory information appeared anywhere on your credit reports (i.e. a new late payment, a new past due account, a new collection account, a new public record, etc.) then the reason for your credit score slide would be easy to explain. However, sometimes the reason behind a credit score decrease is not so obvious. Here are a few lesser-known culprits to consider and may explain your credit score taking an unexpected U-turn.
1. Paying Collections Generally Will Not Improve Credit Scores
The reason why paying off an old collection account typically will not have a positive impact on your credit scores is because most scoring models currently used by lenders do not care much about the balance of your collection accounts, but the fact that you had a collection account in the first place. Paying the collection won’t result in it disappearing, but it is a good idea regardless of the fact that most of the time it won’t lead to a higher score.
2. Something Less Obvious Changed to the Negative
Late payments, fraud, and new derogatory accounts or public records are an easy-to-recognize event that could trigger a negative credit score change. However, there are also less obvious credit troublemakers as well. For example, if everything on your credit reports remained the same between the months of June and July except that your credit card balances increased significantly during that time frame then your scores will likely fall. Higher balances on credit cards will negatively impact your credit scores even if you make every single payment on time.
3. Scorecard Hopping
This is going to be a little technical but still worth mentioning. Perhaps the most difficult to identify source behind hard-to-explain credit score decreases is the “scorecard hop.” Credit scoring models like FICO and VantageScore use scorecards to calculate credit scores. Scorecards are the actual algorithms inside a credit scoring model that does the math to determine your scores. There are several scorecards inside every scoring model and they will all calculate scores differently.
The details behind FICO and VantageScore scorecards is not publically available, but some examples of scorecards are used to calculate unique populations of people who have filed bankruptcy, consumers with “thin” credit reports, and consumers with credit reports free of any derogatory information. As your credit information changes it is possible to hop from one scorecard to another and, although it is unusual, hopping to a new scorecard could potentially lead to lower credit scores as well. This generally occurs if something negative hits your credit reports or an account that was previously helpful is removed from your credit reports.
When my bankruptcy fell off my score went up! How it would go down baffles me. I am now in the high 700’s. Both transunion & exquifax have me @ 780 & 752. Why the difference? IDK.
Im with a credit forum, its amazing how much the average individual has little unknown violations against them by the credit bureaus, for instance, did you know that court related issues such as judgements or bankrupcies are not reported by the courts, but the credit bureaus actually have a dept that seeks out public information and adds it on themselves, its super easy to have removed, or that med records being reported without your written permission is a violation of HIPAA, as well they could be sued for upto 1000.00 paid to you for this violation, also did you know that when a credit bureau says they verified anything on your credit report, you have the right to know exactly how they verified it, if it wasnt a validation of proof of you signature, it should be removed from your credit report if you have requested validation and they did not provide it, and one more, you can request credit bureaus to remove all non account holding inquiries, old addresses, and old employers, failure to do so upon request is a violation if your right. All things that you request and doesnt get accomplished by a simple written requst (note, never sign anything, only send with your name just spelled out, plus any copy of proof of your identity, simply copy and black out any signatures you may have on it), can be reported to the Consumer Finance Protection Bureau in form of a complaint, these guys are super awsome and will help you look after your interest.
Where do I start to get the information you stated?
I have try this before and it didn’t work So I lost my money.
Interesting – I just got my bankruptcy off one of three CRA – My score dropped 42 points with that one particular CRA – That was a real shocker – Now you tell me that a fraud will drop my score also & I just last week had a call about a fraudulent charge – Seems as though the harder I try to raise my score the more it drops ??????????????
How did your score drop 42 points? Did it drop or did it get higher? Please be specific