“John, I sold some stock and used the proceeds to completely pay off two credit cards. That takes my credit card debt from almost $17,000 to zero. It also reduces my debt-to-limit ratio from over 50% to 0%. Needless to say I’m excited to see what happens to my credit scores as a result. How long will it take for my credit scores to reflect this reduction in debt?”
The answer to this question is actually quite simple and it opens up a topic on which I don’t believe I’ve ever written in my 22 years in the credit industry.
The answer to the reader’s question is that it will likely not take more than one month for your scores to reflect this reduction in debt, and if your timing was good it could take much less than that.
The reason it could take up to one month for your credit scores to reflect the reduction in credit card debt is because it could take up to one month for the credit reports to be updated to show the zero balance on those two credit cards.
Credit scores are 100% dependent on the information in your credit reports, so even though your balances are zero today, your credit reports also have to reflect the zero balances in order for your scores to benefit.
This leads me to the next issue, which is the changing of your credit scores. The question suggests that credit scores change over time as data on your credit report changes.
And while this is a completely reasonable assumption, it’s not actually true. Credit scores do not change over time as your credit report data changes.
Changing Vs. Recalculating
Credit scores are not a part of your credit report. They are not “updated” like, for example, your credit card account is updated.
When your score is calculated for a lender it is not maintained as part of your credit history.
It is calculated, discarded, and then recalculated the next time a lender pulls your credit reports and requests a credit score. So, the answer posed in the title of this article is, “Never.”
Your credit score never changes.
Credit Score Tracking Services
There are websites like CreditSesame.com that will give away free credit scores and then track them for you over time but that’s different.
The score tracking is one of their features. The credit bureaus don’t track your scores over time as they’re calculated.
If your VantageScore credit score or FICO credit score is 730 on Sunday and 780 the following Sunday, it gives the impression that your score increased by 50 points during the week.
That’s not true. Your score was simply recalculated a week later and the latter scored out at 780 instead of 730.
Why the Numbers Fluctuate
So how do you attribute different scores over time?
There has to be a scientific explanation of why your score was a 730 last Sunday and a 780 this Sunday, and there is.
The difference in scores is likely attributable to one or more credit report and credit scoring model events. Your score could be different because of;
1) Something material changed on your credit reports.
Assuming everything, and I mean EVERYTHING, stayed the same on your credit reports (dates, balances, statuses, composition) except for one significant change, you could argue that the one change is responsible for the difference in scores.
This would have to be validated by manually scoring the credit report before and after the change and measuring the true impact of that one change.
This manual scoring can take several hours and isn’t fun at all. In fact, I just got the chills thinking about doing it.
2) Something seemingly immaterial changed on your credit reports…but it was actually kind of important.
A great example would be a date associated with an account or with something derogatory.
If an account or a derogatory item crossed one of the many thresholds associated with the age metrics of a credit scoring system and all of a sudden became “older,” that could cause a change in score even though cosmetically the credit reports look the same.
3) Your credit report experienced what’s referring to as Scorecard Hop.
Scorecard hop is a non-technical term meaning that something changed on your credit report and it has caused your credit report to be scored using a completely different series of measurements by the scoring model.
Imagine changing the speedometer in your car from Miles Per Hour to Kilometers Per Hour. You’re still going to same speed but the measurement of your speed is very different.
This can be something as minor as a new account hitting the credit report or an ancient collection falling off.
When you scorecard hop EVERY measurement associated with your credit report changes and it’s next to impossible to put your finger on why your scores are different unless you score the credit report manually.
John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of Mint.com or Intuit. Follow John on Twitter.