FICO Credit Scores to Drop for millions of Americans

Fair Isaac Corp., creator of FICO scores, will start reducing FICO scores for consumers with rising debt levels, those falling behind on payments and those taking out personal loans.
Why? In part because FICO scores for consumers have been rising since the end of the great recession so that many consumers have healthy scores when they are also carrying high debt levels. With higher scores, lenders granted them even more credit. With the longest recovery in history, maybe it's not a great idea to pile on the debt.
The changes reflect a shift in lenders' confidence in the economy and the fact that consumer debt levels are are record highs with many consumers relying on debt to fund their regular expenses (hint! consumers take note!)
While many consumers will see their scores fall, others will see an increase in their FICO score. 
Above 680 is consider a good score while below 600 is considered poor credit.
Fico typically revises its' credit scoring models periodically.
With lenders concerned about how long the recovery from the great recession will last, it's time for consumers to take note. 
A high credit "Utilization ratio" (using most or all of one's borrowing capacity) is always a bad sign.
Reminder: now is a good time to check the accuracy of your credit report (a report is not a score but reflects your current and past credit use. https://www.annualcreditreport.com/

9 Myths About Credit Scores

"People think they know what causes a credit score to rise or fall. They’re often wrong."
Writing for The Wall Street Journal, Demetria Gallegos, explains how credit scores work.
Why are credit scores important?
"A higher score can mean better terms on credit cards, lower rates on mortgages and less expensive premiums on auto and homeowners insurance. It can make it more likely to win approval for an apartment, and get deposits waived when setting up services like electricity and cable in a new home. It can even mean a better chance at nabbing a job offer."

MYTH: Checking my credit score hurts my credit score

MYTH: If I pay my bills on time, that’s all I need to worry about.
Your credit utilization ratio plays a big part in determining your score.

MYTH: Carrying a balance helps boost my credit score.
No! It's one of the worst financial practices.

MYTH: Closing an old credit card with a high interest rate will help my score.
Hold on to old accounts even if you don't use them; having a long history of credit is important.

MYTH: Opening a new retail credit card is a good for your score.
No and these cards charge very high interest!

MYTH: It hurts my credit score to comparison shop for a mortgage, auto or student loan

MYTH: The older my unpaid debt, the more it hurts me.
While bankruptcy will remain on your report for up to 10 years, "it’s the newer delinquencies that will be more aggressively collected" and hurt your score

MYTH: Selecting ‘credit’ while using your debit card for a purchase is good for your credit score

MYTH: Credit reports are accurate. 21% of reports contain inaccurate information. Monitor your data by checking your reports every 4 months:
https://www.annualcreditreport.com/

There are a few existing and coming programs that aim to help consumers demonstrate responsible financial behavior in areas not previously visible to the credit-reporting companies.

Rental reporting "Paying your rent on time can now help your credit score. Such reporting is handled either by big landlords and property-management companies or by individuals who go through a company that verifies and reports the payments."
Phone and utility bills "Experian Boost, a free program launched last December by credit-reporting company Experian, factors household payments for services like telephone, cable and utilities into a person’s FICO score. Consumers connect Experian Boost to the bank account they use for paying these bills. The program then pulls the relevant payment history and immediately recalculates their FICO score."
Bank accounts "In a program expected to launch to consumers next year, FICO will begin taking into account consumers’ banking habits. Under the free program, called UltraFICO, consumers sign up to allow the program to link to their checking, savings or money-market accounts. Consumers are then rated on factors including the account balances they maintain, how long the accounts have been open and avoiding overdrafts."
Learn more about free credit reports: https://www.consumer.ftc.gov/articles/0155-free-credit-reports

FICO changing how credit scores are calculated- may boost scores

"FICO will introduce a credit score next year that incorporates information about how consumers handle savings, checking and money market accounts. The model could help some of the millions of people who have poor credit or no credit." Writing for USA Today, Janna Herron explains: "This additional information could help boost the credit scores of some of the 79 million Americans who have poor credit histories, along with the 53 million who have no credit score at all under the traditional FICO model. That, in turn, could help them qualify for a credit card or loan."
Details at: https://www.usatoday.com/story/money/2018/10/22/new-fico-credit-score-uses-checking-and-savings-account-history/1730838002/

How much do you know about Credit Scores?

How much do you really know about your credit score? How much is myth vs. fact? Take this 12-question quiz. It won’t take long—but the knowledge can go a long way toward improving your score. http://www.creditscorequiz.org/

Bad Credit? Here is reliable help

U.S. News & World Report created resources to improve financial literacy among consumers with bad credit. Topics include how to monitor credit scores and dispute errors, to the best and worst credit cards and how to evaluate them.

U.S. News & World Report’s credit survey and guide can be viewed here:

1. 2017 Survey of Consumers with Bad Credit
2. Before You Apply
3. Choosing the Best Credit Card for Bad Credit
4. Cards to Avoid
5. Using Your Credit Card to Rebuild Your Card

So, you have a great credit rating do ya?

Thanks to Mary Ann Marriot, Trustee in bankruptcy for this post (available at: https://www.linkedin.com/pulse/so-you-have-great-credit-rating-do-ya-mary-ann-marriott)
It seems to me that we are much too tied to a rating system that does very little other than encourage us to spend beyond our means. I am talking about the credit scoring system of course.
There are only two reasons you would want a good credit rating.
1. So you can borrow money.
2. So you can pay the least amount (interest) for the money that you borrow.
There are articles all over the internet that talk about "good borrowing". I'm uncertain any of them have real merit and that maybe a better terms is "necessary borrowing". Let's face it, how many of us would have a house if we couldn't get a mortgage, and a car if we couldn't get a car loan? The rest of the credit - credit cards, lines of credit, etc. would undoubtedly be bad borrowing. Essentially we are borrowing to pay for expenses we should find a way to plan for. And yes, the cost of living does put a hamper on those plans in many cases. But so does spending beyond our means. And most of us do it. We finance trips, nights out, shopping sprees or just plain every-day living expenses like gas, groceries, car repairs etc.
It amazes me...no, concerns me, when I have someone in my office in financial trouble that is more concerned about losing their "credit rating" then getting their lives back on track financially. I hear things like, "my credit rating is perfect" or "I have worked hard to get my credit rating back and it is finally getting there", and then I look at their situation. They are maxed out on all or most of their credit and with a little investigating I find out that they have been juggling the minimum payments for months, or years.
From a credit rating perspective, your credit rating may look good because you've done a good job juggling your payments, not because you are a good credit risk. Want proof? Do you know anyone who got yet another credit card when the ones they had were maxed out (or at least no paid off in full)? If you applied for a new card tomorrow, you would likely get it. When the new credit is approved, you have a false sense of feeling credit worthy, like you are being rewarded. You are not. You have effectively deceived a flawed system with the recipient of the fallout of that deceit being you. And your family. The credit lenders are making money from their investment in you. They are betting that you will make the payments when you max out your card to them, because you are doing it with others. And they are sitting back and raking in the profits when you do so. You, on the other hand, enjoy a temporary relief to your financial stress. One that will end and increase the stress with yet another payment to juggle. If it sounds like I know what I am talking about, I do. Been there, done that, got the very expensive t-shirt (wounds) to show for it.
The moral of the story... just because your credit score is ok, and lenders say you "qualify" to borrow more money, doesn't make it so, Look deeper. Get a financial assessment. Stop the wound before you bleed to death so-to-speak. Trust your instincts and make good financial decisions that positively impact YOUR bottom line, not the lenders, who, in essence, created the system to facilitate lending more money to more people so they could take more of YOUR money.

Americans don't understand credit scores

"Between one-quarter and two-fifths of consumers can't answer basic questions about their credit scores, and many believe that age and marital status affect their scores, according to a survey by the Consumer Federation of America and VantageScore Solutions. By failing to understand credit scores, people "have little incentive to manage the real things that truly do make a difference, such things as paying bills on time, keeping credit card balances low, and not taking out unnecessary loans," said Barrett Burns, president and CEO of VantageScore." Retirement Security SmartBrief, May 14, 2013. For details: http://www.americanbanker.com/issues/178_92/study-shows-widespread-ignorance-on-credit-scores-1059067-1.html

Build a Strong Credit History Web Conference for Consumers

Do you know:

·         How your credit affects your homeowner and auto insurance?

·         What credit score reason codes are?

·         Steps to repair or improve credit?

·         How credit utilization affects your credit score?

Learn the answers and more by participating in the Build a Strong Credit History webinar on Thursday, March 21 - 10:30 to 11:30 p.m. MDT

Hosted by University of Florida Extension.

To register: http://bit.ly/StrongCred

What's a "Good" Credit Score?

I'm often asked what's a good credit score.  Different lenders have different standards for the minimum score they will lend to, and, of course, a sliding scale of interest rates with the lowest rates going to the highest scores. According to the October 4, 2012 Wall Street Journal, the average credit score on mortgages that are sold to Fannie Mae & Freddie Mac (government sponsored enterprises to expand the mortgage market by buying mortgages from lenders to expand the mortgage market) is 766. This is up from an average of 720-730 during the 2002-2007 housing bubble. Generally mortgage lenders require a higher score than loan for vehicles and credit cards but 766 is the average (the highest possible FICO score is 850). fFr more info on credit scores search for "credit" or "credit score" in my blog.

Credit Score of 760 is "good enough" say experts

"Once consumers hit lenders' threshold for a good credit score, usually in the mid- to upper 700s, they will see no appreciable financial reward from boosting their score further, some experts say. For example, borrowers won't get a better rate if their score is 820 instead of 780, says Ken Lin, CEO of Credit Karma." "If you're at 780 plus, it's all bragging rights from there," according to Lin (www.creditkarma.com). Efforts to boost your score above 760 yield few benefits beyond 'bragging rights.' Read the details at:
http://www.investmentnews.com/article/20120113/FREE/120119963

Weathering Tough Economic Times—12 Tips for 2012

"Tough economic times have taken a toll on many Americans over the last couple of years. But making sound financial decisions and saving for the future can help you weather financial storms. The start of a new year is a great time to take stock of your finances, so the FINRA Investor Education Foundation has put together these 12 practical tips that can help keep your finances on course in 2012."

1. Start a Rainy Day Fund
2. Handle Credit Cards With Care.
3. Check Your Credit Report and Score
4. Shop Around For Financial Products.
5. Don’t Leave Money on the Table: Contribute to Your 401(k).
6. Avoid Payday Loans and Other Money Drains.
7. Don’t Overdraw Your Checking Account or Debit Card.
8. Do a Background Check on Your Financial Professional.
9. Keep Your Insurance Coverage Current.
10. Diversify Your Investments.
11. Save for College Using Tax-Advantaged Accounts
12. Find Free, Reliable Financial Education Resources in Your Community: like Financial Planning for Women! (my addition)

For details and links to helpful websites: http://www.finra.org/Investors/ProtectYourself/InvestorAlerts/MoneyManagement/P125281

Credit Repair: How to Help Yourself

“You see the advertisements in newspapers, on TV, and on the Internet. You hear them on the radio. You get fliers in the mail, and maybe even calls offering credit repair services. They all make the same claims:

'Credit problems? No problem!'

'We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!'

'We can erase your bad credit — 100% guaranteed.'

'Create a new credit identity — legally.'”

The Federal Trade Commission (FTC) says, "do yourself a favor and save some money, too. Don’t believe these claims: they’re very likely signs of a scam. Indeed, attorneys at the nation’s consumer protection agency say they’ve never seen a legitimate credit repair operation making those claims. The fact is there’s no quick fix for creditworthiness. You can improve your credit report legitimately, but it takes time, a conscious effort, and sticking to a personal debt repayment plan.”

Learn more from the FTC at: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm

So You Think You Know All About Credit Scores...

http://www.creditscorequiz.org/ is a new website to educate consumers ahead of new regulations’ poised to dramatically affect borrowers.  CreditScoreQuiz.org is an interactive quiz that lets you test their understanding of credit scores and improve your understanding of how your credit scores affects the cost of borrowing money. Compare your score to the national average. After you take the quiz be sure to check out the resources page http://www.creditscorequiz.org/resources/
 
While you’re at it, don’t forget to get a free copy of your credit report once a year from each of the three national credit reporting companies at annualcreditreport.com or by calling 1-877-322-8228.

P.S. I teach this stuff and I didn’t score 100%.

Test your credit score IQ

Credit scores help lenders determine whether to lend to you and, if so, how much to charge (your APR). Credit reports and scores are also used by insurance companies to decide whether to insure you and how much to charge.

Take the interactive credit score quiz and find out how much you know: 
http://www.creditscorequiz.org/

What is a Credit Score Notice?

What about a “Risk-Based Pricing Notice” or “Account Review Notice”? Good? Bad? Indifferent?  Read on and check out the link below for more details. 

“Starting in 2011, many credit-seeking consumers will get more information about how their credit report or credit score can impact a lender's decision to grant credit and the terms under which credit is offered. Beginning January 1, new rules from the Federal Reserve and the Federal Trade Commission require lenders to provide new information to consumers under certain conditions.”

Depending on the circumstances, when you apply for credit through a bank, credit union, or other lender, you may receive a notice with information about your credit report or credit score. The new rules introduce several types of notices:

Credit Score Notice: provides your credit score and how your credit score compares to other consumers' scores.

Risk-Based Pricing Notice: you are being offered credit on terms that are less favorable than the terms offered to other consumers. Hmmm… NOT a good sign!

Account Review Notice: your APR on an existing account is increased based on a review of your credit report. Ouch!

http://www.federalreserve.gov/consumerinfo/wyntk_notices.htm

Credit reports and credit scores

It’s time. Time to order a free copy of your credit report to check for any mistakes and to monitor for possible identity theft. Remind your spouse/partner, parents, grandparents, and adult kids to do the same.  This comprehensive website tells you all you need to know about credit reports and scores. Have you noticed that your auto insurance company is checking your credit report? Why should you check your credit report? Who else besides lenders has a legal right to view your credit report?  Who decides whether you get credit? Click the link and read on! http://www.federalreserve.gov/creditreports/default.htm

“Your credit history is important to a lot of people: mortgage lenders, banks, utility companies, prospective employers, and more. So it's especially important that you understand your credit report, credit score, and the companies that compile that information, credit bureaus. This site--maintained by the Federal Reserve Board--provides answers to some of the most common, and most important, questions about credit.” This is THE authoritative source for information on credit reports, credit scores, and how to resolve credit report errors.