Consumer Credit Scores Could Change Soon
One of the reasons that so many consumers worry about debt and often wait to file for bankruptcy is that they are concerned about a possible hit to their credit score. Creditors do look at credit scores when deciding whether to extend credit to a consumer, and credit scores can have a major impact on a consumer’s ability to buy a car or a house, and sometimes even to be considered for a particular job. What many consumers do not realize is that personal bankruptcy does not always have a long-lasting effect on their credit score. Indeed, many people who file for bankruptcy bounce back quickly and see their credit scores rebound in much less time than they expect.
Yet we do not want to talk about credit scores in relation to consumer bankruptcy today. Rather, we want to say more about a recent NPR article discussing a change to FICO credit scores. According to the article, many consumers are likely to see a drop in their credit scores as a result of the changes. We will say more about how the upcoming changes are likely to affect consumers.
Credit Scores May Drop With FICO Changes
According to the NPR article, the changes to FICO credit scores are expected to be “extensive.” The article says that “about 40 million Americans are likely to see their credit scores drop by 20 points or more,” but not everyone will see a credit score drop. To be sure, “an equal number should go up by as much.” If some credit scores are dropping and some are rising, what are the changes actually doing?
Before we explain the major change that FICO is making, we want to emphasize that the changes are not necessarily unexpected. It is not uncommon for FICO to change the way it calculates credit scores. In fact, FICO tends to make these updates “every five years or so,” according to the report.
Reassessing Personal Loans and Their Impact on Credit Scores
One of the most notable changes is that FICO is shifting the way it treats personal loans when calculating a credit score. Currently, Americans owe approximately $300 billion in personal loans, and they represent the fastest-growing type of consumer debt in the country. Indeed, the rate of personal loan debt is rising faster than the rate of student loan debt. With the changes to credit score calculations, FICO is highlighting personal loans and placing them in a “distinct category to determine whether borrowers use them responsibly.”
Many people use personal loans to pay off credit cards and to make payments on a lower interest rate. Some, however, take out personal loans but continue to accrue credit card debt. FICO wants to distinguish between these types of consumers. Joanne Gaskin, the FICO vice president of scores and analytics, explained that consumers with personal loans actually may be riskier as borrowers than their current credit scores would suggest. In other words, FICO may lower credit scores of consumers with personal loans and credit card debt.
Contact a Consumer Protection Lawyer in Oak Park
Do you have questions about your credit score or its relation to consumer bankruptcy? An experienced Oak Park consumer protection lawyer can talk with you today. Contact the Emerson Law Firm for more information.
See Related Blog Posts:
Recent Student Loan Bankruptcy Case Could Be Good News for Debtors
How Race Affects Consumer Debt and Bankruptcy
Yet we do not want to talk about credit scores in relation to consumer bankruptcy today. Rather, we want to say more about a recent NPR article discussing a change to FICO credit scores. According to the article, many consumers are likely to see a drop in their credit scores as a result of the changes. We will say more about how the upcoming changes are likely to affect consumers.
Credit Scores May Drop With FICO Changes
According to the NPR article, the changes to FICO credit scores are expected to be “extensive.” The article says that “about 40 million Americans are likely to see their credit scores drop by 20 points or more,” but not everyone will see a credit score drop. To be sure, “an equal number should go up by as much.” If some credit scores are dropping and some are rising, what are the changes actually doing?
Before we explain the major change that FICO is making, we want to emphasize that the changes are not necessarily unexpected. It is not uncommon for FICO to change the way it calculates credit scores. In fact, FICO tends to make these updates “every five years or so,” according to the report.
Reassessing Personal Loans and Their Impact on Credit Scores
One of the most notable changes is that FICO is shifting the way it treats personal loans when calculating a credit score. Currently, Americans owe approximately $300 billion in personal loans, and they represent the fastest-growing type of consumer debt in the country. Indeed, the rate of personal loan debt is rising faster than the rate of student loan debt. With the changes to credit score calculations, FICO is highlighting personal loans and placing them in a “distinct category to determine whether borrowers use them responsibly.”
Many people use personal loans to pay off credit cards and to make payments on a lower interest rate. Some, however, take out personal loans but continue to accrue credit card debt. FICO wants to distinguish between these types of consumers. Joanne Gaskin, the FICO vice president of scores and analytics, explained that consumers with personal loans actually may be riskier as borrowers than their current credit scores would suggest. In other words, FICO may lower credit scores of consumers with personal loans and credit card debt.
Contact a Consumer Protection Lawyer in Oak Park
Do you have questions about your credit score or its relation to consumer bankruptcy? An experienced Oak Park consumer protection lawyer can talk with you today. Contact the Emerson Law Firm for more information.
See Related Blog Posts:
Recent Student Loan Bankruptcy Case Could Be Good News for Debtors
How Race Affects Consumer Debt and Bankruptcy
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