"How soon will my credit scores change if I pay off this credit card balance?"
"Why are my credit scores different every time I check them?"
"I've paid off some collection accounts. How soon will my credit score update?"
These are just a few examples of some of the most common questions I’m asked in my capacity as a credit expert. While the questions are all slightly different, they all address the same underlying issue. The real question all of the questions pose is this: "How frequently are credit scores updated?" The answer might surprise you.
Your Credit Score Is a Snapshot, and Then it Disappears
Your credit scores are not actually a permanent part of your credit reports. Instead, it is a snapshot evaluation of your level of credit risk at a given point in time.
Credit scores are an “add-on” or ancillary product sold with your credit reports to help lenders predict your level of credit risk. When you apply for financing, like a mortgage loan, your credit scores may be calculated and delivered to the company that requested your information. Once the scores are delivered, they are immediately discarded. They never become a permanent or even a temporary part of your credit reports.
Credit scoring software is designed to evaluate the information that appears on your credit report and dilute that information into a number that tells lenders your level of credit risk.
In addition to the fact that your credit scores are not a part of your credit reports, your scores never actually update or “change.” Rather, credit scores are recalculated whenever you or a lender asks to see them again. If the information on your credit reports has changed from the last time your credit scores were calculated, your scores will be different from previous scores. If everything on your reports is 100 percent the same, which is highly unlikely, the same scores you earned the last time would be the result, again.
Credit scores are based entirely and exclusively on the information contained in your credit reports. Credit scoring software is designed to evaluate the information that appears on your credit report and dilute that information into a number that tells lenders your level of credit risk. Both FICO and VantageScore’s credit scores are designed specifically to predict the likelihood that you will become 90 days late on any credit obligation within the next 24 months.
The information on your credit reports does not actually update in real time. This means, for example, if you pay off a $3,000 credit card balance today, your credit reports will not reflect your new balance until sometime in the next 30 days when your credit card issuer sends the credit bureaus an update on your account. So, if you are hoping that your credit score will be calculated differently due to some action you have taken today or yesterday, you are going to have to wait until the information on your credit reports actually changes first before a new or different score will be the result.
Shift Your Focus
If you are working hard to improve your credit scores, perhaps to qualify for a mortgage loan or some other type of financing, you may need to shift your focus. Credit scores are a product of scoring software and you have no access to or control of the software. However, you do have the ability to control much of the information that appears on your credit reports. Given enough time, simply maintaining on-time payments, avoiding too much new credit and paying down your credit card balances is often enough to have a very positive influence on your credit scores, regardless of when or how often they are calculated.