Why Does My Credit Score Go Up and Down?

Credit scores are one of the most vital aspects of your financial health. Typically, credit scores range from 350 to 800 – the higher your credit score, the more favorable loan terms you’ll receive. Lenders use those numbers to determine how likely you are to pay back the loan. 

If you’re looking into getting a mortgage or other loan, it’s good to know the reason why your credit score goes up and down. Understanding what affects credit score fluctuation can help you take the necessary steps to increase your score.

Clark County Credit Union breaks down the most common factors that affect your credit scores:

Payment history

Payment history accounts for 35% of credit scoring, making it the most important factor. One late or missed payment will hurt your credit score. When you have several loans and debts, it might be easy to forget their due dates. Automating your payments will help avoid late or missed payments.

Credit utilization ratio

The second most important factor is the credit utilization ratio. This makes up 30% of your credit score. For example, if you have a $1,000 limit on your credit card, it’s best to keep your balance under $200-$300 during the month. Keeping your credit card usage under 30% of the credit limit will help increase your credit score. 

Credit history length

Credit history makes up 15% of your credit score. In general, the longer your credit history, the higher your credit score will be. A short history of credit is not a bad thing if you show how responsible you are in managing your credit accounts.

Types of credit

Having a variety of credit types improves your score, so having an auto loan, credit card, and other credit products (with no late or missed payments) is a good indication of how well you manage different credit products. This accounts for 10% of your credit score. 

The number of new credit lines opened

New credit lines make up 10% of your score. It’s worth taking note that having multiple credit card inquiries poses a big risk to lending companies. This may negatively affect your credit score. When you apply for a new credit account, make sure it’s what you truly need. 

Credit Health

Having a good credit score will give you better lending opportunities down the road. Don’t be alarmed when your credit score goes down by a few points. Instead, understand the reasons why it went down and have a plan on how to increase it. Also, maintaining a good credit score stems from managing your credit accounts – on-time payments, credit usage, and many more! Get started on planning to pay off your debts by using Clark County Credit Union’s Debt Payoff Calculator for free!