Changes to Your Credit Score

Photo: Consumer Financial Protection Bureau

Your FICO score is the most used model by lenders to determine your creditworthiness, and now how your credit score is calculated is being changed.

Depending on your situation over the last two years, that may help or hurt your credit score.

The new system will be called FICO Score 10, and it will look at the past 24 months to determine your credit score. Thus, depending on the last 24 months and your financial situation, your score may increase or decrease.

Before, your FICO score was based on your current balance, but by going back 24 months, it could see steps you took that is considered risky.

For example, if you got a personal loan to pay off your credit card debt and consolidated your payments into a single monthly payment, then with the new system, your credit score may be reduced. Thus, personal loans are considered risky.

I consider that bad news and unfair. For example, that fact that you did the right thing and paid off your debt and probably got a lower interest rate, not to mention lower monthly payments, you are now being penalized for that.

The flip side is that a bump in your balance, for example, increasing your debt one month may not affect have a negative impact, or maybe minimal since it is based on a 24 month period.

Have questions regarding Chapter 7 bankruptcy, then contact Attorney Alex Hernandez for your free consultation. Saturday appointments are available.

Attorney Alex Hernandez

Representing clients in the areas of Chapter 7 Bankruptcy, Family Law/Divorce, and car and motorcycle accidents for 20 years. (904) 712-5565 or (305)-688-LAWS (5297). *Se Habla Español

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