There’s a new FICO score in town, and it may mean your credit gets a boost by 20 points or more. Instead of relying on an overall snapshot of a person’s financial habits, the new way of rendering a FICO score will take a very close look at the past 24-months.
If you happen to be bogged down by student loans but pay your bills on time and haven’t taken out any significant loans since college, your score may jump significantly. But the flip side is also true: if you happen to be a financial risk, your score may drop more than 20 points with the new changes.
The new score will also take a closer look at credit card debt as a result of personal loans. People that took out personal loans to clear credit card debt and proceeded to rack up new credit debt are financial risks.
Previous FICO scores did not take personal loans into account, which could mean bad news for millions of Americans that have been using the increasingly popular method of taking out a personal loan to clear the debt.
The possibility of a credit score increase is also good news for people seeking to refinance a home. With an increase in credit comes the option of refinancing at a much lower rate, which, in turn, could make housing more affordable for millions of Americans.
The new changes will go into effect over the next few months.