Finally!  There's going to be a new way for the FICO (Fair Isaac Company) to score your credit.  You know, that three digit number that says if you'll be purchase a home with a loan and dictates how good your interest rate will be?  Yep, the way this number is calculated is what's changing.  They're calling it the FICO 10 Suite. 

For most of us, this new system will give a nice credit boost, unless you are one of the ones who use personal loans for financial leverage.  The old way of scoring looked at payment history.  The new way of looking at credit will be based on the last 24-months of credit history, including timely payments and account balances.

The VP of product management at FICO said, 80-million people are going see a shift in their credit score.  Basically, half are going to get a credit boost of more than 20-points and the other half, well, it's going to suck to be you.  This new way of scoring will mainly target those who utilize personal loans.  

These changes are expected to take place this Summer 2020.  Here's what you can do win the FICO boost lottery:

  1. Lower your debt to credit limit.  ex. If your credit limit is 10,000, and your debt is 8,000, get this debt paid down somehow. 
  2. If you always have a balance on your credit card, pay it off.
  3. Make your payments on time, because they'll be reporting 24-months of your payment history.

Why are they targeting people with personal loans?  If you've read my past blogs, you know, we as a nation are borrowing way too much money.  We have seen household debt increase $92 BILLION dollars, just in the last part of 2019.  Our household debt is now, 13.95 TRILLION dollars.  #*&!, something's gotta give...  I mean, did you hear that?  13.95 TRILLION dollars.

In making these changes, FICO believes this will unleash precision and flexibility to increase predictive power for lenders.  In other words, they believe these changes will give lenders greater ability see the loans that might foreclose later down the line and avoid lending to them in the first place.  Not only do lenders want to know you'll pay your loan on time every month; they want to know you can pay that loan off too.

As always, remember, when the time comes, I hope you know, I'm working hard to be your only Realtor.  Your real estate financial plan will be more effective, the earlier you reach out to me.  For most people, purchasing real estate will be the largest financial decision you will ever make.  You do not want to mess it up!

-Elise Russo, your total real estate resource and favorite broker :-P

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