Maintaining a good credit history, protecting your personal credit score and paying off debt are all very important aspects of having a secure financial future. However, in regards to your credit history, there is a whole new list of things to worry about as credit reports are set to become more personal than they ever have before.
The Fair Issac Corporation, or FICO as it more commonly known, holds the standard for determining a borrower’s credit worthiness through a credit score. FICO is now developing a new set of standards for what affects your credit score, and determining credit worthiness – using much more personal information than their former standards.
What Affects Your Credit Score?
Most of us are familiar with the current breakdown of a credit score:
- 35% Payment History
- 30% Amounts Owed
- 15% Length of Credit History
- 10% New Credit
- 10% Types of Credit Used
However, FICO has teamed up with a data providing company, Core Logic, to develop a tool that will analyze information like child support payments owed, payday loans, the current standing of utility bills, rent and even cell phone bills. Experian, EquiFax and TransUnion, the three biggest credit bureaus, also offer lenders the opportunity to find out the borrower’s estimated income.
With the current financial crisis and sluggish economy, lenders and creditors are trying to develop tools that will ensure a minimum risk of extending credit. As they try to protect their assets, new tools such as more personalized credit reports are being developed.
Many individuals feel that these new personalized credit reports are overly invasive and may not be much more effective at determining the credit worthiness of the borrower.
What Affects Your Credit Score Will Get Even More Invasive
What many individuals do not know is that credit reporting companies like Core Logic sell your information like the amount of your income, how much your debt to income ratio is and even predicts if you take your medication as prescribed to determine your risk rate.
Core Logic combines property and mortgage data including parcel, legal and geospatial information, eviction notices, tax records, motor vehicle information, criminal background reports, credit history, payday loans and can even include if you are behind on Home Association dues.
When contemplating accruing new debt, keep in mind these new personalized standards – this can greatly improve your credit score. Knowing the new credit score criteria can also help you open the door to a better chance of being approved for loans with lower interest rates and cheaper overall costs.
Requesting your credit report from the three previously mentioned credit bureaus can help you build a financially sound future and is great for learning how to fix bad credit as well. Look over each item in your credit report carefully and note any mistakes or errors you feel shouldn’t be on your report.
photo by Stuart Miles
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