The game of credit is one with many twists and turns. Credit and credit scoring is an intricate system that has a delicate balance. The good things on your credit take time to develop and slowly help your credit score. The bad have an immediate and devastating effect on your FICO score. Recently, the game has changed in credit, in the favor of those who were previously underserved by the credit industry. Here are five facts about the new scoring method and how it will change credit for many.
Utility bills now help
Previously, bills like electricity bills did not appear on credit. No matter how faithfully these bills were paid, they didn’t have any good effects for the consumer. With the new changes made, utility bills will be taken into account and weighed during a FICO score.
Utility bills are a great way for those who do not use credit cards, loans, and other financial products to show just how responsible they are with repayments. With the Great Recession having an effect on the credit of many, those who stayed faithful with their core household payments will get a leg up with the new credit scoring system.
Cellular payments will count, too
A cellular phone is the first real “line of credit” that many people obtain. Even those that do not use credit cards will often have a cellular device, as our generation requires phone and internet usage. As around 90% of people in the United States own a cell phone, this bill can be a defining factor in having a blank credit report, or a credit line that reports as good. Cellular phone lines will now be tied into credit reports.
Address history will play a role
Your history of address will now be used by credit reporting agencies to determine some level of stability. Moving around a lot, and having a number of addresses listed with the credit agencies can make a consumer look unstable. It will be important to ensure that credit-reporting bureaus have correct addresses and any errors are removed.
Paid collections make less of a mark
In the previous FICO scoring system, paid collections and unpaid collections presented the same credit challenge. Each of these made credit scores drop, no matter their status. With the new FICO scoring updates, paid and settled collections will not count poorly against scores. This is good news for consumers who have settled or paid collection accounts and wish to have a new start.
Unpaid medical debt makes less of a mark
Many Americans have some medical collections on their record. Not being able to afford hospital treatment is an issue that has been long discussed in the United States. FICO is making changes to the way medical debt is weighed to consumer scores. Starting with the brand new model, medical debt will make it happen less. Those who have been burdened with high medical costs do not have to deal with a ruined credit score due to family or personal illness.