If you have had a good FICO credit score and all of a sudden it dropped or if you recently noticed it had dropped and you've been paying all your bills on time, you may be wondering what happened and what affected your credit score.
First of all you don't have just one credit score you have many different scores and FICO is just one of them.
These credit scores can change all the time and you won't be aware there have been any changes if you haven't been checking it quarterly or even annually with a credit report.
The FICO score is the one most commonly known and it's the score that's used by most lenders and lending institutions to compute your score.
There are three major credit bureaus of many out there but you hear about Experian, Equifax and TransUnion the most.
They all sell FICO scores except for Experian.
Experian stopped selling it recently and has its own version of it.
Equifax and TransUnion however continue to sell it.
Now back to what caused your FICO score to drop.
Usually if you're paying off your credit cards your credit score rises, but if you're still charging to your credit card or racking up other debt you may see a drop in your scores.
Let's say you paid off your balance but still noticed a drop.
That's because the credit bureaus use the credit card statements that are most recent and they haven't received your newest credit card statement showing the balance paid off or just paid down, no matter how much its been paid down.
So it boils down to keeping as low of a balance as you possibly can and know that it takes a little time for the credit bureaus to receive your newest credit card statement and adjust your FICO score or other scores if they don't use FICO.
FICO scores are what the credit bureau uses to determine if you're paying off your debts - in other words whether or not you'll be a good risk.
It's all about risk.
So make sure to keep making your payment on time and do everything you can to not make any late payments.
That's the killer.
That will really affect your credit score and you can expect a drop.
Paying on time or a little early doesn't hurt.
Especially online where you have more control of the credit card company receiving your payment on time.
You can only do the best you can do and not worry about it.
Thousands of people are having the same problem right now and this may be taken into consideration in the future for determining FICO scores.
Let's hope so.