08
Apr

Many consumers all across the country have made very serious efforts to increase their credit standings over the last several years because of financial difficulties they may have experienced in the past. However, one thing many may not be aware of is despite all the work they did is that their credit score can still change somewhat, and does almost all the time.

While credit repair efforts can put a consumer in a far better position to both more ably handle their finances and find the most affordable types of financing available, it does not ensure that a person's credit score remains high, or even stays static for very long. That's because a credit score is a kind of snapshot of all aspects of one's current and their more recent borrowing history, and many factors that go into determining credit standing don't stay the same for very long.

Why a credit score can fluctuate over a short period
Even if borrowers have made efforts to keep their payments going in on time and in full, which helps to preserve the 35 percent of their scores that is based solely on this factor, the other 65 percent of a score can change dramatically because a lot of moving parts go into determining it.

For instance, by far the largest remaining portion of one's score is what is known as their "credit utilization ratio," which accounts for another 30 percent. Essentially, what goes into determining this factor is the amount of money a person owes on all their various accounts versus their total available limits. As a consequence, depending upon how much a borrower spends or pays back on their cards over the course of a month, their score can change considerably.

For instance, if a borrower were to begin the month of April with $1,500 in outstanding balances on cards with a total combined limit of $5,000, he or she is already using 30 percent of the accounts' limits (this is important because that proportion is the most borrowers can generally carry before this portion of their scores start to slide). And on top of that preexisting $1,500 in debt, he or she spends another $200 on these cards over the course of the month, and then pay back $250 when the bills come. Overall, he or she may have slashed their debt by $50 in April, which put his or her rating in better standing, but before sending the payments in, the spending also added to the total debt. As such, any lender that checked after the borrower added the $200 but before the $250 was paid back would see a credit utilization ratio of more than 30 percent, because at the time, total obligations amounted to $1,700. That, in turn, would mean the resultant score would have been lower.

Similarly, other factors related to determining a score can change on occasion. For example, the average amount of time a borrower has had all his or her accounts makes up another 15 percent of their credit score. If one had a new credit card for just one year, student loans that date back five years, and a three-year-old auto loan, the average age of those accounts is three years. The longer a demonstrated credit history, the better off a borrower will be, and as such, this portion of one's score might constantly be improving, but can also be lowered when new accounts are opened.

Further, credit mix – that is, the amount of different types of credit a borrower has at any one time – makes up 10 percent of a score, and opening new types of accounts or closing old ones will obviously have an effect on this portion of a rating. In general, though, more accounts are considered better because they show that borrowers can juggle a number of different types of obligations.

Finally, the last 10 percent of one's score is based on the number of inquiries into new lines of credit made in the past several months, and those who avoid this, or do it conscientiously so as to avoid getting dinged, will likely keep that part relatively healthy. However, those who are repeatedly rejected but keep applying may be damaging their ratings as a consequence.

One other thing to keep track of
Of course, another issue that can occasionally diminish a borrower's credit score, usually through no fault of their own, is if unfair markings appear on one's credit reports. As such, taking the time to check these documents for such entries regularly may be of the utmost importance.

If any such markings are discovered in the course of such a check, it might be wise for borrowers to contact a credit repair company, which may be able to help correct the potential problems.