File under About Time!
Changes are coming to the FICO credit-scoring system, potentially allowing millions of people to better to qualify for mortgages and get better rates!
Easier loans? Credit score changes affect millions
The Wall Street Journal reported that Fair Isaac, which produces the FICO score, will no longer include failures to pay bills when calculating a score if the issue has since been resolved. The tabulation also will take unpaid medical bills less into account, according to the Journal.
Unpaid medical bills unfairly hurt scores
Out of the 106.5 million Americans with a payment collection on their report, 9.4 million had no current balance, which means their credit scores will be bolstered by the new system. This is good news!
What Matters in Your Score
Here’s what matters:
Payment History is 35% of the score – Late payments are killers, no matter the size or the loan or payment. Mortgage lates the ones to avoid the most. Tip – avoid closing active accounts, especially if you have a long, good payment history. Amount Owed 30% – Balances that are more than 10% of your available credit on each account begin to “ding” your score. Paying off or down small balances on small line accounts takes less cash and will increase the fico score Length of Credit History 15% – The older, the better, unlike Hollywood actresses Type of Credit 10% – Have a mix of credit cards, car loans/leases, mortgages for best scores. Don’t have none, OK? That is called a “thin” file and lenders hate it. How do they know you can handle credit? New Credit 10% – Lots of new credit or excessive inquiries in a short time are red flags you are running out of cash. If you are planning to get a home or refinance don’t open a bunch of credit before you know your current FICO. Talk to a mortgage pro first