The Fair Isaac Corporation has announced that by the end of 2020 their new credit scoring method will be available for use by lenders.
Reports are that about 40 million Americans will see their credit scores rise by 20 points or more, while another 40 million will see their scores drop by 20 points or more. High scores will go up and low scores will go down.
If you’ve been working to bring your credit up from the low side, that’s scary.
But there IS good news with regard to your Pittsburg home buying plans.
It’s doubtful that mortgage lenders will begin using FICO 10, at least not in the near future. WHY? Because most have not switched to FICO 8 or FICO 9. Most prefer what is referred to as FICO’s “classic” scoring method.
Still, since you may want other credit in the future, it’s a good idea to pay attention to the new scoring method.
Here’s what will be different and important:
FICO 10 will look at two years’ worth of payment history, and see ANY late payments as a red flag. So don’t slide a payment into the grace period. Pay everything on time, every time.
FICO 10 will reward those who pay their credit card balances in full each month. It will also penalize those who use more than 30% of their credit line on any card.
FICO 10 will take a hard look at personal loans to see if they’re being used responsibly. So don’t take out a low interest personal loan to pay off high-interest credit cards unless you’re going to cease carrying balances on those cards.
Credit history will still be important, so do NOT cancel any credit cards. If you have several, use each occasionally and pay the balance in full each month.
Meanwhile, keep doing what you’re doing to raise your credit scores. No matter which scoring method is used, paying down debt and making payments on time will be to your benefit when you apply for a mortgage loan.
And… no matter how high your score is today, pushing it a little higher is always wise.
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