By Allan Halcrow | American Express Credit Intel Freelance Contributor
6 Min Read | August 13, 2020 in Credit Score
Credit score simulators will give you a pretty good idea of how specific actions will impact your credit score, but the results are just estimates not guarantees.
The tools are most valuable when you use them to educate yourself before you make a financial decision.
Before using any credit score simulator, it’s important to know what they can – and can’t – do.
The only way to know with certainty how a specific action or financial decision will affect your credit score is to do it. But using a credit score simulator can give you a pretty good idea of the likely impact of many common financial changes.
With credit score simulators, you can explore how many points you stand to gain or lose by improving your on-time payment history, closing an account, or asking for a higher credit limit. And because these tools rely on unique data from your own credit profile, experts say that credit score simulators can help you understand how your credit score might change before you take action.1
To assess the value of these tools, I took three credit score simulators for test rides:
All three tools are free, and I found all of them easy to use. Although those factors made them a logical place for me to start, be aware that there are more simulators out there. More and more banks and other financial service providers are offering credit score simulators. Some of those providers charge for using the tool, often as part of a suite of services that typically includes free credit reports, credit monitoring, and fraud protection.
Each credit score simulator I used includes several pre-set actions. You can also fill in the blanks and use drop-down lists to tailor your simulations. Running simulations won’t affect your real score, so part of their value is testing multiple actions to compare their relative impact. I used the tool to test-run some things I am actually considering – such as increasing my credit limit on one card – and others that I never, ever intend to let happen, like allowing an account to go to collection. Though, predictably, some actions had much greater impact than others, the results were always illuminating.
For example, the simulators estimated that increasing my credit limit $1,000 would have no impact on my score. Increasing it $2,500 gave me just a one-point boost. In contrast, the tool estimated that getting a new credit card with a $1,000 limit would cost me six points. That simple comparison underscored the value of the simulator, in my eyes, because it answered my question about which option was best for my credit score.
Other comparisons also surprised me. The simulator estimated there would be no change in my score if I allowed a single account to fall 30 days past due. But allowing all of them to fall 30 days past due led to an estimated free-fall plunge of 122 points. Allowing one account to go to collection would cost me an estimated 45 points. Similarly, paying off the full balance on one card improved my score only an estimated one point, but paying them all off gave me an estimated 47-point boost.
The bottom line: Using credit score simulators helped clarify – sometimes surprisingly – how different specific financial actions would affect my credit score.
To get the most out of a credit score simulator, it’s important to know what to expect. For one, your results will be different than mine because, as one expert notes, credit scores are as unique as fingerprints. But that’s not all:
Even taking these caveats into consideration, a savvy user who wants to improve their score can analyze various options through a simulator to help guide their credit score improvement program. For more insight, read “How to Improve Your Credit Score.”
Free credit score simulators are readily available and make it possible to estimate the impact of specific activities on your credit score. Although the results are neither absolute nor guaranteed, they are valuable educational tools to help you understand how your credit score is shaped. If you use them, and act on what you learn, changes in your credit score shouldn’t be a surprise.
1 “Use a Credit Score Simulator to Road-Test Financial Decisions,” NerdWallet
2 “Credit Score Simulator,” Credit Karma
3 “Free Credit Score,” NerdWallet
4 “My Credit Guide,” American Express
5 “FICO Score vs. VantageScore,” The Balance
6 “FICO Score Estimator,” MyFICO.com
7 “FICO Changes Could Lower Your Credit Score,” Wall Street Journal