Why Did My Credit Score Improve? (2024)

In this article:

  • Your Credit Utilization Ratio Decreased
  • Negative Information Fell Off Your Credit Report
  • You Paid Down Existing Debt
  • You Diversified Your Credit Mix
  • A Hard Inquiry Fell Off Your Credit Report
  • You Are Managing Your Bills and Credit
  • Keep Up With Positive Credit Habits
  • Using Credit Score Growth as Motivation

A credit score increase can be a welcome surprise, but it may have you wondering why. Your credit score may go up for several reasons, and they all have to do with changes to the information on your credit report. Common reasons for a score increase include: a reduction in credit card debt, the removal of old negative marks from your credit report and on-time payments being added to your report.

The situations that lead to score increases correspond to the factors that determine your credit score. For instance, the removal of late or missed payments from your credit report after a certain period can lead to score growth because payment history is the single most significant factor in your score.

Read on to learn more about the reasons why your credit score might have gone up.

Your Credit Utilization Ratio Decreased

Your credit utilization ratio is the amount of revolving credit you're currently using compared with your total credit limit. Scoring models calculate credit utilization based on your individual credit card account balances as well as your total utilization across all credit card accounts. Credit utilization is a major component of the "amounts owed" factor, which makes up 30% of your FICO® Score .

When you pay off a credit card balance, your utilization on that card drops to zero—and your overall utilization drops too. That generally has a positive effect on scores (though showing you can manage credit cards on a regular basis means that a low overall ratio is better than zero). Since account information is updated with the credit bureaus after the end of a billing cycle, you may not see a score change until 30 to 45 days have passed after reducing your credit utilization.

Keeping your credit utilization below 30% of your available credit can help you improve your scores, and the lower, the better. Paying down your balances is the most straightforward way to reduce your credit utilization, but you can also request that a credit card issuer increase your credit limit. An increased limit can help you reduce your utilization even if you maintain the same credit usage. However, you should resist the temptation to use that increased limit to add to your debt. This could leave your utilization ratio worse off than before and result in more interest charges. After requesting a credit limit increase, you might see a brief drop in your score if the issuer had to make a hard inquiry in order to review your credit report as part of its decision-making process.

Negative Information Fell Off Your Credit Report

Negative marks on your credit report include late payments, bankruptcy, collections, foreclosure and student loan default. Each of these stay on your report for seven years, with the exception of Chapter 7 bankruptcy, which stays on your credit report for 10 years.

Even if you end up paying off an account in full, past late payments on that account will remain on your credit report until that seven years is up. When a negative mark does eventually come off your report, your credit score will likely increase. It's not possible to pay a company to remove a negative item from your report early, despite the promises some services make.

Rehabilitating a defaulted student loan through the federal government's official program, though, will remove the default notation from your report. Previous late payments will stay for seven years.

You Paid Down Existing Debt

Paying down your revolving credit, which is a type of debt that includes credit cards and other lines of credit, could potentially result in a quick credit score increase.

On the other hand, paying off installment debt such as personal loans, student loans and mortgages, generally won't affect your score as positively right away. That's mostly because installment accounts aren't factored into your credit utilization. Another reason is that paid-off accounts will be listed as closed, and closed accounts aren't weighted as heavily in score calculations as open accounts. Paying off debt in general is a smart move, but reducing loan balances won't necessarily result in an immediate credit score increase.

The news is also mixed when it comes to paying off or settling accounts in collections, meaning they're past due and have been sold to a debt collector. Newer credit scoring models won't factor paid-off collections accounts in your score, which means that particular negative mark won't negatively affect it.

But older scoring models, including those used for mortgage lending, will still consider the derogatory mark of your collections account in your credit score, which means paying off or settling the account won't increase it.

You Diversified Your Credit Mix

A less significant, but still important, element in your credit score is credit mix. This refers to the types of credit accounts you currently hold, which generally come in two types: installment credit and revolving credit.

Credit mix accounts for 10% of your FICO® Score. It can contribute to a higher score if you add a new type of credit to your report, such as a mortgage if you only had credit cards or a credit card if you only had student loans—as long as you continue to manage all your debts responsibly.

Diversifying your credit mix often is a result of the normal course of borrowing and adding accounts to your credit portfolio. It's not a wise move to take on more debt accounts in an attempt to increase your credit mix. The effect you'll see on your credit is likely to be very small, and the added debt can affect your personal finances.

A Hard Inquiry Fell Off Your Credit Report

When you apply for a loan, line of credit or credit card, a lender or credit card issuer will pull your credit report to check your payment history, other debt obligations and experience managing credit.

This is called a hard inquiry, and a record of the credit check will make its way onto your credit report. That happens so that credit scoring models, as well as other lenders and credit card issuers, can see how often you've applied for credit in the past. If you have many applications to a variety of credit types, you may appear to be a bigger lending risk. Credit scoring models do recognize the importance of rate shopping for loans like mortgages and auto loans, however, and will count similar loan applications as one inquiry if they're submitted over a period of a couple weeks.

Hard credit inquiries stay on your credit report for up to two years. In most cases, they'll only negatively affect your credit for a year or less. A single inquiry's effect on your credit will be slight, if it's noticeable at all, and can be blunted by positive payment history and other responsible credit behavior. If your score increased recently, it might be because an old hard inquiry is no longer being factored into your score.

You Are Managing Your Bills and Credit

Score improvements can also be a result of ongoing responsible credit management, like paying your bills on time and paying off your credit card balance in full each month. These two habits alone will ensure that payment history and credit utilization, the two most important scoring factors, always contribute positively to your score.

Length of credit history also accounts for 15% of your FICO® Score. It's generally in your best interest to keep credit card accounts open, even if you're no longer using them, since past positive payment history will continue to benefit you. (You may decide to cancel a credit card, though, if it carries a pricey annual fee or you're tempted to use it to overspend.) A prolonged period of responsible credit behavior will lead to top-notch scores over time.

Keep Up With Positive Credit Habits

Watching your credit score increase is a cause for celebration. It's also a driving force to keep your score strong and even improve it further. As always, making sure you're paying bills on time should be your top priority, so consider setting up automatic payments to your loans and credit cards from a bank account each month.

Other positive credit habits include limiting new credit applications to only what you need and checking your credit report and score regularly. That way, you can notice right away if your score drops or unusual activity appears on your report, which could be a sign of fraud or the result of a creditor reporting the status of your account incorrectly. Identifying and addressing any errors will help prevent them from causing an undue negative impact on your credit.

Using Credit Score Growth as Motivation

Take pride in an increased credit score, because it means that you're soundly managing the complexities of your credit file. It's not only good news today, but it presents a solid opportunity to learn more about how your credit score is calculated—and to put into practice habits that can bring you continued score growth in the future.

Why Did My Credit Score Improve? (2024)

FAQs

Why Did My Credit Score Improve? ›

New payment behavior is a common cause for credit-score fluctuation. Additionally, when making payments on an installment loan, mortgage or auto loan, you are decreasing the amount of overall debt. That could also cause an increase in your credit score.

Why did my credit score suddenly increase? ›

New credit.

Changes to these and other factors on your credit report are what result in adjustments to your credit scores. That data could also include balance changes, the opening of new accounts, payments on existing accounts or closed accounts falling off your credit report after a period of time.

Why is my credit score improving? ›

Common reasons for a score increase include: a reduction in credit card debt, the removal of old negative marks from your credit report and on-time payments being added to your report. The situations that lead to score increases correspond to the factors that determine your credit score.

Why did my FICO score go down when nothing changed? ›

Closed accounts and lower credit limits can also result in lower scores even if your payment behavior has not changed. However, if you are certain it is for no reason, check to be sure there is not a mistake in your credit reports or that you're not a victim of identity theft.

Why did my credit score go up 100 points? ›

But if you take certain steps to improve it, like paying all of your bills on time, then gradually, you might see it go up by 100 points. The higher your credit score, the more likely you are to get approved when you want to borrow money or sign up for a new credit card.

Why did I get a random credit increase? ›

You've used your existing credit line responsibly

As a reward, the credit card issuer may automatically grant you a higher credit limit, or invite you to request one. It could be just a small bump, or it may be as much as 30%. The news may come to you out of nowhere, but it's no reason to be concerned.

Is 700 a good credit score? ›

For a score with a range between 300 and 850, a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent. Most consumers have credit scores that fall between 600 and 750. In 2023, the average FICO® Score in the U.S. reached 715.

Why did my credit score go down when I pay everything on time? ›

It's possible that you could see your credit scores drop after fulfilling your payment obligations on a loan or credit card debt. Paying off debt might lower your credit scores if removing the debt affects certain factors like your credit mix, the length of your credit history or your credit utilization ratio.

Is 750 a good credit score? ›

When your score is 750, you're in a strong position to qualify for most financial products and get among the very best rates on them. A 750 credit score is considered excellent on commonly used FICO and VantageScore scales, which range from 300 to 850.

How is a FICO score different from a credit score? ›

Your FICO® scores are just one type of credit score that lenders or creditors may use when determining whether they'll provide you a loan or credit card. While FICO® scores are commonly used by lenders to assess your credit risk, other credit scores can also give you a good idea of where you stand.

Is a 900 credit score possible? ›

Highlights: While older models of credit scores used to go as high as 900, you can no longer achieve a 900 credit score. The highest score you can receive today is 850. Anything above 800 is considered an excellent credit score.

Is 650 a good credit score? ›

As someone with a 650 credit score, you are firmly in the “fair” territory of credit. You can usually qualify for financial products like a mortgage or car loan, but you will likely pay higher interest rates than someone with a better credit score. The "good" credit range starts at 690.

How to get 800 credit score? ›

Making on-time payments to creditors, keeping your credit utilization low, having a long credit history, maintaining a good mix of credit types, and occasionally applying for new credit lines are the factors that can get you into the 800 credit score club.

How did my credit score go up so quickly? ›

New payment behavior is a common cause for credit-score fluctuation. Additionally, when making payments on an installment loan, mortgage or auto loan, you are decreasing the amount of overall debt. That could also cause an increase in your credit score.

Why did my credit score go up after a charge off? ›

Once you have paid off the entire amount, you can ask the credit bureaus to change the account status to: paid in full, balance zero. The account will still show that it was charged-off for seven years, but your credit score will improve and future lenders will look more favorably at your status.

Can my credit score go up 30 points in a month? ›

There is no set maximum amount that your credit score can increase by in one month. It all depends on your unique situation and the specific actions you're taking to improve your credit. Realistically, you probably won't see your credit score increase by more than 10 points in a month.

How often can credit score increase? ›

Your credit scores can update often—multiple times a month even. It all depends on how many active credit accounts you have. When information is received by the credit reporting agencies from your lenders, it's typically added to your credit reports immediately.

Top Articles
Latest Posts
Article information

Author: Foster Heidenreich CPA

Last Updated:

Views: 6834

Rating: 4.6 / 5 (56 voted)

Reviews: 95% of readers found this page helpful

Author information

Name: Foster Heidenreich CPA

Birthday: 1995-01-14

Address: 55021 Usha Garden, North Larisa, DE 19209

Phone: +6812240846623

Job: Corporate Healthcare Strategist

Hobby: Singing, Listening to music, Rafting, LARPing, Gardening, Quilting, Rappelling

Introduction: My name is Foster Heidenreich CPA, I am a delightful, quaint, glorious, quaint, faithful, enchanting, fine person who loves writing and wants to share my knowledge and understanding with you.