Do you have a lousy credit score? Well, I’ve got great news for you! In the very near future, your credit score could skyrocket. Why? Because the way credit scores are currently being calculated is going to change.
What if you DO have a good credit score? Well, this change will actually still affect you- potentially in a negative way. Some experts are predicting that interest rates will skyrocket after these changes are put into place.
So what exactly are these changes all about? There are 3 main things:
1) If someone had a bad debt that they later paid off through collections, that bad debt won’t affect FICO scores anymore.
2) Any debt relating to medical problems will have less impact on scores. In fact, if the only bad debt someone has relates to a medical problem, those people might see an increase of 25 points or more in their FICO numbers.
3) Fair Isaac will evaluate people with little credit history using a new algorithm that will give them a higher grade.
So how could these changes potentially affect interest rates? FICO scores are used by lenders to determine the risk of the borrower. FICO has been providing credit scores since 1989 and has developed a very accurate creditworthiness gauge, but starting soon the scores will be inflated. Interest rates will also be inflated, because there is more risk in the market.
It will be very interesting to see how the market changes after these FICO changes are implemented, and you can be rest assured that my team and I will be closely monitoring the situation.
If you’re wondering exactly how these FICO changes may affect you, contact my office at 702.331.8185.