February 8th, 2020 11:00 AM by Jackie A. Graves, President
The way FICO scores
are calculated is changing this summer, and the move could make it tougher for
some Americans to get approved for a mortgage, The Wall Street Journal reports.
Corporation, more commonly known as FICO, will soon start more harshly
penalizing the scores of consumers who have rising debt levels or who fall
behind on loan payments. The company will also flag certain consumers who sign
up for personal loans, which is a growing area of debt.
Just how could this
impact borrowers? Consumers with high FICO scores of 680 or higher who continue
to manage their loans may see an increase in their scores. But those with
scores below 600 who continue to miss payments or have blemishes on their
credit will see even larger declines in their scores. The best way for
consumers to increase their credit score: Pay down bills on time and reduce any
credit card balances, financial analysts say. They also advise that borrowers
keep revolving debt below 30% of their available credit so that they don’t see
a larger impact to their credit score.
“Credit scores are
extremely important because they help determine whether or not you get approved
for a loan or line of credit, and if you do, what interest rate you will be
charged,” Ted Rossman, an industry analyst with CreditCards.com, told CNBC.com.
“They’re among the most important numbers in your financial life.” According to
FICO, the average score nationwide is now over 700—the highest on record.
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