Homebuyers

Why Your Credit Score Keeps Changing and What Homebuyers Should Know

Have you recently received an email saying your credit score has changed? You’re not alone.

Credit scores often bounce up and down, sometimes month to month. These changes can be confusing, especially for those financially preparing to buy a home.

The higher your score, the more likely you are to qualify for a home loan. You may also be able to snag a lower mortgage interest rate, which can save you money every month. 

The good news is that most credit score fluctuations are completely normal. They usually reflect daily financial activities and aren’t cause for alarm.

Still, understanding what causes these small shifts, as well as what can trigger bigger ones, can help homebuyers avoid surprises. This can help them stay ready when it comes time to apply for a mortgage.

Here’s what causes shifts in your credit score. This is what you should watch for if you’re planning a home purchase.

Small changes in balances can affect your credit score

One of the most common reasons credit scores shift is how much you use your credit card.

“They are dynamic scores based on your credit data at any given instance in time,” said Adem Selita, co-founder of The Debt Relief Company, based in New York City. “They are cumulatively based on your credit scoring and payment history.”

Credit scoring focuses on how much of your available credit you’re using. This is called credit utilization.

For example, say you have a credit card with a $10,000 limit and your statement closes with a $3,500 balance. This means you’re using 35% of your available credit.

If your statement closes the following month with a $1,500 balance, your utilization drops to 15%.

That difference alone can cause your credit score to move up or down, even though you paid both balances in full.

What homebuyers should do: In the months before applying for a mortgage, try to keep credit card balances well below your limits. Try to keep them under 30%, or even lower if possible.

Payments are reported on a schedule impacting your credit score

Credit reports don’t update every day. Instead, lenders usually report account details monthly.

That means your score can vary depending on when a payment posts or when a balance is reported.

Paying a bill even a day late or having a statement close with a higher balance can temporarily affect your score, even if your account is current.

“If your bills are always paid on time, which can only have a positive effect on your credit score, you won’t see much of a change,” said Ian Gardner, the director of business development at Florida’s Sigma Tax Pro in Delray Beach. “However, missed payments will significantly affect your score.”

What homebuyers should do: Consistency matters. So, before you buy a home, aim to your your bills on time every month.

New credit activity can cause short-term credit score dips

Opening a new credit card, taking out an auto loan, or even applying for financing can cause a brief drop in your credit score.

That’s because opening a new account lowers the average age of your credit history.

Additionally, credit inquiries indicate increased borrowing activity. These effects are usually small and fade over time. But they might jump out to lenders carefully reviewing your credit.

“Homebuyers should also know that sometimes an action may not affect their credit score until a few months later,” said Gardner. 

A good rule of thumb is to not open any new accounts for three to six months before you plan to apply for a mortgage.

What homebuyers should do: Avoid opening any new credit accounts or applying for unnecessary financing in the months before applying for a mortgage, as lenders look for stability.

Different credit scores are used for different purposes

Many homebuyers are surprised to learn they don’t have just one credit score.

The score shown on a credit-monitoring app or bank dashboard is typically designed for general consumer tracking.

However, mortgage lenders rely on specific credit scoring models that are crafted to evaluate long-term repayment risk on home loans. These models weigh factors like payment history, outstanding debt, and credit age a bit differently.

For example, a buyer might see a 740 score in a credit-monitoring app, while a mortgage lender may see a 720 using a different scoring model. That’s despite both scores being based on the same credit report.

What homebuyers should do: Ask your lender which credit scores are used for mortgage qualification. This can help you determine where your profile is strongest or needs improvement under those models.

Why your credit score matters when buying a home

For homebuyers, credit scores directly influence mortgage rates, loan options, and approval terms. Even small score differences can affect monthly payments over the life of a loan.

“Buyers should know that it’s important to maintain good payment history,” said Selita. “But they shouldn’t forget to optimize their credit score for when a lender inevitably performs a credit pull.”

The best way to do this is to maintain a low utilization and prepare a diverse credit portfolio months before the credit check.

How to keep your credit score as high as possible before buying a home

The good news is that most credit score fluctuations reflect behavior you can control. If you’re planning to buy a home in the next year, these steps can help you boost your score.

• Pay all bills on time, every time
• Keep credit card balances low
• Avoid opening new accounts
• Hold off on large purchases financed with credit
• Check your credit reports for errors and dispute them early

Most importantly, don’t panic over minor changes. A score that moves a few points up or down is normal and rarely signals a problem.