May 25, 2009
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There's gonna be some credit score changes around here, Pt.4
Wrapping it up.Next on the list and not least, comes delinquency weighting. Credit card lending institutions have always kept track of this:
> 1 day credit card payment missed =small fine;
> 30 days missed (1 full billing cycle) = hefty fine with nasty letter;
> 60-days late come the threats and permanent penalties and;
>120-days late is considered total default -- "charge-off and collections" procedures.But, now the difference is, this is all being factored (weighted) into the FICO formula and will have a much greater impact on credit card consumer's "FICO 08" score.
For greater robustness, 'FICO 08' is also incorporating a broader credit picture. That is, in addition to credit cards, they are also considering peripheral lines of credit —such as mortgage, car loans, college loans, etc. Treated responsibly, these will now have a positive affect on a person's credit card score. Irresponsibly? Well, that's gonna be more severe.
To sum it all up, the new, more comprehensive credit card scoring system will focus on more reliable indicators like:
o Credit history: Credit card lenders will look at depth and breadth. How long accounts have been open in good standing.
o Credit Utilization: (amount of credit we use compared to what's available to us). Has the consumer utilized large amounts of credit responsibly? If so, than that's good.
o Number of Late Payments: Piddley incidentals will be overlooked, while repeat offenders will be hammered.
o Number of On-time Payments: Instead of just "punishment-feedback", consumers will be awarded merit for being faithful.
o Nature of the Payments: (if already in default, how badly, etc.) Minor violations will no longer be treated the same as major violations. In fact, amounts under $100 may not even be counted. o Other Miscellaneous Variables.'FICO 08' can be your friend. It can save you thousands by treating you more fairly. It's good to be familiar with a system that can help us in those ways. Check out our credit card offers on the home page. It's a great way to start building a healthy credit card score.