When is your credit score calculated? We tend to talk about credit scores changing, increasing or decreasing over time. In reality, your credit score doesn’t have an independent existence, living in your credit report and growing or shrinking as your credit history changes. Instead, your credit score is calculated on demand whenever a lender requests it, delivered — and then deleted. The next time it’s needed, your credit score is calculated again from scratch, from whatever data is in your credit report at that moment. Think of it as a Snapchat snapshot, capturing the essential elements of your credit report at a single instant in time, and disappearing once its work is done.
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When Is Your Credit Score Calculated?
So when, exactly, is your credit score calculated and what happens to it in between calculations? In a way, your credit score only exists when a lender or insurer purchases it. Then, the relevant data from one or more of your credit reports is fed into a computer and run through one of the statistical credit scoring models, usually FICO or VantageScore. The number it generates is your credit score at that moment. It is sent to the purchaser who requested it; no other record of it is maintained. So while your credit score acts as a sort of distillation of your credit report, your credit report does not actually contain your credit score. That’s why the free annual copy of your credit report to which you’re entitled does not include your credit score.
How Often is Your Credit Report Updated?
Your existing creditors report updated account information to the credit bureaus regularly, usually on a monthly basis. Although this new data is immediately added to your credit reports, your credit score is not “updated” every time new information rolls in. Why not? Remember, your credit score isn’t sitting around someplace waiting for updates. It’s generated on demand whenever a financial institution checks your credit. Whenever it’s calculated next, it will include that new information.
What are Hard Credit Inquiries?
Anytime a financial institution makes a “hard” inquiry into your credit in the course of deciding whether to approve your application, your credit score is calculated and sent to that financial institution. It might be a lender considering a mortgage or loan application, a bank considering a credit card application, or a property manager considering a housing rental application. Any credit inquiry connected to a specific application for new credit is a hard inquiry. Usually, your authorization is required for a hard credit inquiry.
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Ironically, having your credit score calculated too frequently can affect the results of your credit score calculation. Multiple hard inquiries in a short period of time can result in a lower credit score, as lenders interpret lots of new loans or credit card accounts as a sign of cash shortage, and therefore increased the risk of default.
What Are Soft Credit Inquiries
So does that free annual copy of your credit report affect your credit score too? No, because checking your own credit report, or checking your own credit score, is classified as a “soft” credit inquiry, and soft inquiries don’t affect your credit score. Other examples of soft credit inquiries include background checks run by prospective employers, pre-qualified credit card offers, and pre-qualified insurance quotes. Soft inquiries can be run without your permission and may not appear in your credit report at all. Your credit score won’t be affected unless it’s been calculated, and when is your credit score calculated? Only when a creditor makes a hard inquiry into your credit.