77ºF

What you need to know about changes coming to credit scores

Major changes to model will affect how credit scores are calculated

JACKSONVILLE, Fla. – Credit scores affect everything from student loans to interest rates on a mortgage to the ability to purchase a new car.

No matter what end of the credit spectrum you're on, you could be affected by changes coming to the credit-scoring model used by companies like Equifax, Experian and TransUnion.

VantageScore, the company behind the equation that determines credit scores, plans an overhaul of the model in the fall.

Here are just three of the major changes coming to how your credit score is calculated:

  • It will be based on trended data, meaning it will look at your debt on a month-to-month basis.
  • It will reduce the number of medical debt or tax lien records that appear on a credit report. For example, unpaid medical bills will be ignored for six months to give insurance companies time to make payments.
  • Closing credit card accounts will not hurt you.

Under the new scoring method, you'll be penalized for owning a bunch of credit cards, which means it's time to cancel and cut the cards you just don't use.

Starting in the fall, excessively large credit card limits could have a negative impact on your score.

“The obvious advice is to pay their bills on time,” loan officer Andrew Bachmann said. “Easier said than done."
Bachmann also recommended everyone take a look at their credit report and if there are any discrepancies, to fix them as soon as possible.

Mortgages issued by government-owned companies like Fannie Mae and Freddie Mac won't be affected because they require a FICO score and don't use VantageScore.

For more information on the changes, go to https://your.vantagescore.com/vs40-intro.