If you wake up to find your credit score has taken a big drop – let me explain why. FICO scores have recently made adjustments and will soon start scoring certain items more harshly than before. FICO adjusts its scoring model every few years so this is typical. But most importantly, what items are changing for 2020?
-Consumers who have rising debt levels will be scored more harshly
-Those who have high credit utilization rates over long periods will also be penalized more than in the past
-Missed payments will be weighed more heavily
-Consumers who sign up for personal loans will be flagged and this could detrimentally affect their scores
Ultimately these changes will create a larger gap between consumers who are deemed to have either good or bad credit. Those who have credit scores that are below 600 and continue to accumulate debt or miss payments will see a decrease in scores.
The good news: Consumers who have high FICO scores already should actually see a higher score given timely payments moving forward. Rather than seeing a drop, you might be pleasantly surprised to find your score has risen.
Other items to note are that bank account balances and timely payments of utilities have been taken into consideration for consumers with limited credit histories — this gives them the opportunity to earn a higher score and a better chance at securing a loan.
Here are a couple additional tips to boost your scores…
-Always make minimum payments on all bills
-Pay off debt and keep credit balances low
-Time your inquiries for new loans or new debt (too many inquiries in a short period can hurt your score)
-Keep open old credit cards with zero balances (if you have no fee or can have the fee waived) as older accounts in good standing help your score
-Always periodically check your credit score for inaccuracies and dispute any that arise
Best of luck on your credit journey!
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