My credit score seems to fluctuate wildly. I understand that missing payments, high credit utilization, or opening new accounts can negatively impact it. But what about those months where I haven’t done anything different? I’ve made all my payments on time, my credit card balances are stable, and I haven’t applied for any new credit. Is it possible for my credit score to decrease even when I’m being financially responsible and not making any obvious changes to my credit behavior, and if so, what are some of the less obvious or "hidden" factors that could be causing these unexplained dips? Specifically, I’m curious about things like the impact of closing old accounts (even if they’re unused), the reporting practices of different creditors, or even errors that might creep into my credit report without my knowledge. Can my credit score actually go down for no reason?

Answer

Yes, your credit score can appear to go down for no apparent reason. Here’s why:

• Reporting Lags: Credit scores are based on information reported to credit bureaus. A creditor might delay reporting information, leading to a temporary appearance of a lower score until the information is updated.

• Credit Utilization Fluctuations: Credit utilization (the amount of credit you’re using compared to your total available credit) has a significant impact. Even if you’re always paying on time, fluctuations in your spending can affect your score. For example, if you charge a large purchase to your credit card and don’t pay it off before the statement closing date, your utilization will increase, potentially lowering your score. Once you pay down the balance, your score should rebound.

• Inactivity: Closing credit card accounts or not using them at all can reduce your overall available credit, which could increase your credit utilization ratio if you’re using other cards. Inactive accounts might also be closed by the issuer, shortening your credit history and potentially affecting your score.

• Changes in the Credit Scoring Model: Credit scoring models (like FICO and VantageScore) are periodically updated. These updates can change how certain factors are weighted, which may result in a score change even if your credit behavior remains consistent. These changes are usually very subtle and may not have a significant impact.

• Age of Accounts: As your credit accounts age, they contribute positively to your credit history. If you close older accounts, it can shorten your average credit age, potentially causing a slight dip in your score.

• New Accounts: Opening new credit accounts can lower your average account age and result in a hard inquiry on your credit report, which could temporarily lower your score.

• Errors on Your Credit Report: Mistakes can happen. Incorrect information on your credit report (e.g., a wrongly reported late payment or an account that doesn’t belong to you) can negatively affect your score.

• Changes in the mix of credit: Credit scores favor having a mix of different types of credit, such as credit cards, installment loans, and mortgages. If the composition of credit mix changes over time (for example by paying off an installment loan) this might slightly lower your score.

• Disputes: If you have disputed an item on your credit report, it might temporarily affect your credit score until the dispute is resolved.

• Credit inquiries: Hard inquiries, which occur when a lender checks your credit report to make a lending decision, can slightly lower your score, especially if you have several within a short period. Soft inquiries, which occur when you check your own credit or when companies check your credit for pre-approved offers, do not affect your score.

• Thresholds: Credit scores are often broken down into ranges (e.g., Excellent, Good, Fair, Poor). You might be close to the boundary between two ranges, so a small change in your credit behavior could push you into a lower range.