Changes to FICO Credit Scores Will Help Many Consumers Obtain Credit

Fair Issac Corp. has announced it is making changes to the way it calculates a person's FICO Score - the most widely-used credit score in the U.S.  These changes should make it easier for many consumes to obtain credit at more favorable terms.

Two of the major changes are:

1. Collections that have been paid off completely will no longer included in the credit-score calculations.
2. Medical collections will be given less weight in the credit-score calculations.

These changes should have a significant impact on the number of people who will no be able to qualify for financing.  Since the recession and housing market mess, lenders have only approved the most credit-worthy borrowers, as measured by credit scores like the FICO Score.

According to credit bureau Experian, about 106.5 million consumers have collections on their credit reports (64.3 million with medical collections) and about 9.4 million have no balance.

While some critics are concerned that loosening credit standards will result in increasing losses for borrowers, banks and lenders, Fair Issac said it has analyzed the likelihood borrowers with excellent credit with the exception of these accounts before making the changes.

Fair Issac changes their credit score models every so often and lenders may use any model they choose.  It may take some time for these changes to affect the mortgage industry since the credit scoring model used by most mortgage lenders is not usually the most recent.

Have questions about your credit or mortgage?  Contact me at BarkerLoans@gmail.com or 708.473.7688.

Be Credit Smart this Holiday Season

Be Credit Smart this Holiday Season 

 

This holiday season, as you are out shopping for those must-have gifts, here are a few tips to prevent damage to your credit scores:

1)       Use credit sparingly.  If you cannot afford to purchase a gift, decide if you really need to buy it.

2)      If you are putting purchases on your credit cards, be mindful of your current balances and credit limits.  As your credit card balances get closer to your credit limit, your credit scores can be effected negatively.  And, if you go over your limit, that can have a dramatic impact.

3)      Every time you apply for credit there is an inquiry into your credit history and scores. Several inquiries can negatively impact your credit scores. A lot of creditors and retailers offer incentives to open a new credit account.  But, are these incentives worth a lower credit score?

4)      If you are using your credit cards for convenience, you don’t have to wait to receive your bill in the mail to pay for your purchases.  Once you are done shopping, you can pay your bills online directly from your checking account.  This will keep your balances lower and your credit scores higher.

5)      With all of the extra mail that comes this time of year, it is easy to overlook or misplace a credit card statement or other bill.  Make sure you are on top of your monthly payments.  Even one late payment can have a significant effect on your credit scores.

Happy holidays to you and yours!

 

If you have any questions regarding mortgages, buying a home, refinancing your mortgage, or your general finances, I am always here to help.
 

Please contact me at BarkerLoans@gmail.com