Your credit score is dependent on your credit reports. Using formulae, and algorithms, credit bureaus calculate your credit score based on the data on your credit report.
Your credit score can vary from one credit bureau to another because their scoring systems may differ. Some lenders do not report to all three of the credit bureaus, therefore, your credit reports, and credit scores might not all be equal.
What Information Is Recorded in A Credit Report?
Your credit report provides details on your financial history over the past 5 to 10 years. This report includes both personal information and details of your credit history. Your credit history includes:
- Credit applications,
- Late or missed payments,
- Loan defaults, and
Any credit applications made over the past 5 years will be recorded on your credit report. These are known as inquiries. There are two types of inquiries – hard inquiries, and soft inquiries. Hard inquiries negatively impact your credit score to a greater extent than soft inquiries.
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How Is A Credit Score Calculated?
Several factors are considered when calculating your credit score. Each factor accounts for a percentage weighting; the weighting of each factor may vary between bureaus. These are the most important factors to calculate your credit score/scores.
- The number of accounts you have,
- The types of accounts,
- Your used credit vs. your available credit,
- The length of your credit history, and
- Your payment history.
When Are Credit Scores Updated?
Each creditor has their own procedure for when they report to bureaus. In general, you can expect a report to be made every 30 to 45 days. Your credit score is calculated using algorithms that analyze data on your credit report.
Therefore, your credit score should change when your credit report is updated. In general, credit reports get updated at least once a month.
How Does My Credit Report Affect My Credit Score?
Your credit report should be updated monthly. All new information gathered in that month will show on your report, or on one of your reports. Depending on the nature of the transaction, your report will either come back with negative data, or positive data.
If there are negative items on your credit report, you can expect your credit score to drop. Certain negative items will impact your score more than others, for example defaulting on payments, or making too many hard inquiries within a few weeks.
You can expect your credit score to automatically update every month based on the changes made to your credit report/reports since the previous calculation. Keep an eye on your credit reports to ensure that there are no inaccuracies, that your payments have been made on time.
If you want tips on how to raise your credit score, check out our other articles.