Barnes Credit Repair And Rehabilitation Services (Barnes Credit Rehab)wants to be the most innovative and knowledgeable website when it comes to credit, credit repair and finance, so we want to educate our consumers/clients.
A lot of people do not even know the true value of good credit, what it means, and how to achieve because it is not taught. It is learned from mistakes, when you are trying to get a loan from a lender, and usually, it is too late. Once it is late that is when you learn. But here is some new information that you need to know. It could affect all of us from every socio-economic status. Credit Bureaus are getting ready to get a real beating come July 1, 2017 and a new way of credit scoring is emerging. Also, debt collecting agencies are getting ready to crank up the heat in verifying consumer information for accuracy.
According to Ken Sweet from The Associated Press, the way your credit score is calculated now will be totally different soon. It is said it so different that spenders as well as risk borrowers will alter their behavior. The math used to calculate your score is getting ready to change.
Those with high credit scores due to the golden rule of not closing your credit card accounts will be affected. However, those low scores due to the removal of civil judgements, medical debt and tax liens will see a score increase. Getting approved for a credit card will be based solely upon your credit score which will determine your interest rate.
The new method implemented later this year is by VantageScore, a company created by credit bureaus Experian, TransUnion, and Equifax.* Right now Fair Isaac Corporation’s FICO score is used to by mortgage lenders, but VantageScore is noted handling 8 billion account applications in the year 2016.* Therefore, if you applied for a credit card and thought you would be approved, it maybe due to the new VantageScore for you getting denied.
Each consumer’s trend of paying off debt will be viewed. If paying more than the minimum balance due to pay off debt then that is viewed as a good trend. However, if paying just the minimum then that is viewed as a RED FLAG. The trajectory of a borrower’s debts on a month-to month basis will be taken into account.*
John Ulzheimer, an expert in reports and credit scoring, says this has been considered by the credit score bureaus but not implemented on a meaningful scale until now.* More lenders are starting to look at this factor and adopt this.*
People with high scores now maybe mostly affected because the goal of the VantageScore is to identify the warning signs before the borrower actually gets into trouble.
Sarah Davies, Senior Vice President for Research, Analytics and Produce Development at VantageScore says when it comes to prime borrowers, you may have bad behavior on your credit file, but a trajectory provides powerful information.*
Change is also going to affect the maximum number of years an account can be left opened. An important metric in calculating scores has been the portion of their available credit people are actually using.* A person with $5,000 in credit card debt with a $50,000.00 limit across several cards could score better than someone with $2,000.00 in debt on a $10,000.00 limit because of ratio.* However, with VantageScore having a large limit on credit card debt on the theory that the person could run up a high debt quickly is not good.* Those with high scores maybe affected most since they are more likely to have the most credit cards opened and those that play the card rewards program points could be affected as well.*
Now as for removing civil judgements and tax liens, this became legal after a 2015 judgement because tons of errors were found. Not including a person’s name, address, social security number, and date of birth was the cause of this judgement. All information had to be included. If anything was missing then the judgement or tax lien could be removed. This law has already been implemented but in July 2017 all credit bureaus will have to remove these errors.
Crank up the heat! If you, the consumer, do not remember anything, remember this. Bureaus hate investigations! Their sole purpose is to report what lenders give them to report.
Medical bills are often reported to bureaus before the insurance had time to reimburse. Debt collection agencies usually contact the consumer before the consumer even knows their bill is in collection. In July 2017, debt collectors must have updated information every 90 days on the consumer. If they do not record the correct the information then medical bills in collections must be removed.
Consumers with these type of errors are already seeing a significant increase as high as 20-40 points in their credit score.
Under the VantageScore, mortgages will not be affected. The government-owned mortgage companies Fannie Mae and Freddie Mac require a FICO score for eligibility and because of their influence on the market few lenders use the VantageScore.*
*Ken Sweet, The Associated Press and The Wall Street Journal;USA Today. Major changes coming to how your score is calculated;4/13/17.