COLUMBIANA, Ohio (WKBN) – On Thursday, FICO announced two changes to its credit scoring system. This system is the most widely used in the U.S.
“This is going to sound extreme, but I have really had people come to me with scores of 400 and they think they are in an impossible situation and they can’t repair their credit,” said Credit Repair Specialist Chastity King.
King is a certified credit repair specialist. Good and bad credit are something she deals with on a daily basis.
“Every credit model is different, so whenever you go to get a car loan or you are going to get a mortgage, based off the companies that those entities use, they are going to use a different model to come up with what they call a FICO score,” said King.
Fair Isaac and Company (FICO) is a data analytics company started in 1956. It is the gold standard of consumer credit risk in the U.S.
“Currently, FICO still does use the model where you have 35 percent based off your payment history. 30 percent is based off of what they call utilization, and that is how you responsibly or irresponsibly use your credit cards,” King said.
Length of credit and new credit are also factors that determine your score, but there are changes coming to this scoring system.
These changes will attempt to widen the gap between good and bad credit.
The new scoring system will include looking back two years of credit history along with trending data.
Keith LaMorticella is a regional manager for Motto Mortgag. The mortgage process is more complicated because your credit is pulled from three major credit bureaus.
“Three of the major bureaus are TransUnion, Equifax and Experian. So in the mortgage world, we will take the middle of the three bureaus and we will use that credit score and we will base the approval off of that,” said LaMorticella.
And when you are ready for a mortgage, knowing what is on your credit report is almost as important as your credit score. It can make a huge difference.
“You want to go to someone that is really gonna say, hey, let’s pull your actual credit reports and let’s see what’s out there because credit karma is not going to get everything,” said King.