You’ve probably heard on repeat now that credit scores are super important, especially when it comes to getting a loan, renting an apartment or buying a car. And you’ve probably also heard that doing things like paying loans on time can help increase your score, and things like not paying loans on time can decrease your score. So, it’s only natural to wonder exactly how often your score itself is updated to reflect these actions. We’re glad you asked, but it’s a tricky question with some even trickier answers.
The short answer is that your credit score gets calculated whenever you apply for a loan. The credit bureaus don’t recalculate your score all the time – just when you ask them to. So, in a way, your score is in the process of updating all the time. Here are a couple things to keep in mind.
Different lenders report to credit bureaus at different times.
Typically, lenders disclose your loan information to credit bureaus about once every month. However, they don’t all do this at the same time. If you have two credit cards, one might report on the 10th of every month, and the other might report on the 15th. So, if you applied for a loan on the 12th, the information from the second credit card probably won’t be factored in.
There might be a big difference between when you make a payment and when they report.
That timing gap can also affect your credit utilization (the amount of credit you have used compared with the total amount of credit that has been extended to you), which affects your credit score. Say you make a large purchase on your credit card, but pay it off at the end of the month. If you request your credit score after you make the purchase but before you make the payment, your credit utilization is going to be much higher than if you request your credit score after that payment is reported.
Basically, the best rule of thumb to follow is to make payments, even the minimum payments, for all your loans, bills and other commitments, on time. The higher your credit score, the easier it will be for you to secure home loans, car loans and even personal installment loans.