A couple of weeks ago; it was announced that there are changes being made to the FICO scoring system. This new scoring system could help some borrowers; while hurt others. While their formula of creating the score is "Super-Secret" - we know the basics.
Here are a few the changes:
Authorized Users: Someone who is an Authorized user on an account, such as a credit card - will no longer get the benefit of a good (or bad) payment history. Many college students, or 'significant others'; would be on a Parents or Partners credit card account. Often times the "User" wasn't really paying the bill - the Account Holder was paying.
This could negative impact those who truly should have joint credit. Let's say a wife had the account before she was married. Then instead of changing the account to a joint account - she just added her husband as an authorized user. His score could now go down; because he no longer will have the benefit of the history of this account.
This change is expected to impact about 30 Percent of Credit Files.
1-Late won't kill you: We have all been on vacation on some random beach sipping an exotic cocktail and forgotten to pay the dang VISA bill! These 1-time "oops" used to lower your score by as much as 100 points. Now the system will be much more forgiving. However, if you make it a trend - it will hurt you more than before.
Better Sorting: The credit score will now weigh differently your late payments - between a $5,000 loan and a $50 charge to ABC Appliances. I remember when I bought my 1st house - I had to address a charge I didn't know I had; that was in collection. It was $17 ! It was a HUGE issue with the bank; even though I had no idea I owed it. Silliness.
We all have an old Credit Card we hardly ever use. Well use it. No don't rack up a huge balance - but by not using the card; it will lower the effectiveness of the positive credit rating from that account.
Here are a couple of Articles for more information: New FICO Changes you need to know Your New and Improved FICO Score
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