Page 11 - April Digital 2020

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Your Credit Score May
FICO, whose scores generally range from 300 to 850 (the higher, the better).
Here’s what you need to know about the new credit scoring system.
Why change scores now?
FICO adjusts its scores every few years, drawing on consumer behavior and patterns that emerge from the vast trove of data it tracks. This time, the company is offering two new scores, FICO 10 and FICO 10 T, and both differ from the previous formula.
Given the strength of the job market and other factors, many consumers are managing their credit well. Late payment rates across all household debts are at their lowest levels since at least 2005, according to a recent analysis from Moody’s Analytics, and credit scores have been trending higher. (The last time the formula was tweaked, in 2014, it was expected to lift scores.)
Even so, a significant number of lower- and middle-income Americans are struggling, and consumer debt levels are quite high. And lenders are always trying to shield themselves from losses, should economic conditions deteriorate. FICO says the new scores will make it easier for lenders to gauge a borrower’s risk.
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Soon Change. Here’s Why.
FICO is tweaking its all-important formula. Scores will rise for about 40 million people and drop for another 40 million.
By Tara Siegel Bernard Jan. 25, 202
New FICO scores could put consumers who lean on credit cards in hard times at an even greater disadvantage.Credit...Keith Srakocic/ Associated Press
Your credit score — that all-important passport within the financial world — may be about to change. And it won’t necessarily be because of anything you did or didn’t do.
The Fair Isaac Corporation, the company that creates the widely used three-digit FICO score, is tweaking its formula. Consumers in good financial standing should see their scores bounce a bit higher. But millions of people already in financial distress may experience a fall — meaning they’ll have more trouble getting loans or will pay more for them.
Lenders use FICO scores to judge how likely you are to make timely payments on your loans. But they’re also used in lots of other ways, and can influence how much you pay for car insuranceto whether you’ll qualify to rent a new apartment.
The changes, reported on Thursday by The Wall Street Journal, don’t alter the main ingredients of your score, but they do take a more finely tuned view of certain financial behaviors that indicate signs of financial weakness.
For example, consumers who consolidate their credit card debt into a personal loan and then run up the balance on their cards again will be judged more severely.
“The new scores reflect nuanced changes in consumer credit trends that we observed from our analysis of millions of credit files,” said Dave Shellenberger, vice president of product management at
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