Creditors normally report information to the major credit bureaus at least once every month. Your credit score can change on the basis of new information received by the credit reporting agencies. When you pay your bills on time, your credit score increases, but if you use all of your available credit, make late payments or become delinquent on loans, then your score decreases.
To file credit reports, your creditors must have established credit reporting accounts with Equifax, Experian and TransUnion. Most major lenders make monthly reports to all three agencies, but some creditors only establish a reporting relationship with one agency. Some lenders, particularly lenders that write loans for people with very poor credit, do not report to credit agencies at all. If you take out a loan to build or re-establish your credit, make sure that your lender actually reports your payment activity, otherwise you do not gain from establishing the loan.
When you take out an installment loan, a credit card or a revolving line of credit, you are billed on a monthly basis. Your payment history accounts for about 35 percent of your overall credit score, so when you fail to make your monthly payments on time it can damage your score. However, credit bureaus only penalize you for payments that are more than 30 days past due. If you miss your due date by less than 30 days, your lender can assess a penalty fee but it does not impact your credit score.
In addition to reporting monthly payment activity, lenders also notify the credit bureaus of other credit events such as short sales, foreclosures and charged-off debts. These events remain on your credit file for up to seven years and negatively impact your score. Additionally, if you fall behind on a monthly payment, after reporting your payment as 30 days past due your lender updates the credit bureaus if you have failed to make the payment after 60, 90 and 120 days.
When you open a new credit card or take out a new loan, it may not appear on your credit report for a few months because the lender typically does not report it until up to 30 days after your first payment. Therefore, if you are applying for a mortgage or car loan you must tell your lender about any new credit accounts you recently opened, because these accounts may not show up on your credit report but your lender needs to know about all of your existing debt in order to determine how much you can borrow with a mortgage or car loan.