New FICO® Score: Need to Know In 2020:

Your credit score may change pretty soon, no matter how flawless or blemished your credit report might be.

Fair Isaacs, the data analytics company focusing on services on credit scoring, has announced recently that they will make several significant tweaks to the FICO system, the most popular and most extensively used credit scoring system today. Lenders refer to this score to determine if the loan applicant is creditworthy, whether it is for a credit card, a debt consolidation, a car, or a home.

The recent announcement of Fair Isaacs raised many questions from people about what such changes even mean. They are also curious to know what they could and should do make their scores better once these changes officially take effect.

Approximately 80 million Americans can expect to see changes in their credit score of over 20 points and a whole lot more will notice smaller shifts as estimated by the company. There are some who may see a rise in their scores while others will note a decline.

The new FICO 10 system of Fair Isaac as well as its alternative FICO 10 T has the purpose of minimizing what it refers to as credit score inflation. Among the major changes is the separation of the personal loans to their respective categories.

The previous system usually rewarded the borrowers who used the loans for consolidating their credit card debt, no matter how their debt is managed. The goal of the new system is to help creditors with better identification of the borrowers who are responsible in using those loans and others running up more debt on their credit card even after they secured a debt consolidation loan.

Aside from that, FICO 10 is meant to weigh decreasing and increasing levels of debt more heavily compared to the old system with the use of trended data for 24 months. For example, a borrower who has a history of having their credit cards paid off each month who then starts to carry higher balances are going to notice a more negative score on the FICO score more than before.

It is also expected that missed or delinquent payments will be judged in a harsher way than before. On the other hand, those who previously had late payments but were able to build a more recent record of on-time payments are likely to enjoy a score bump.

You have to keep in mind that if you already established good financial habits, such as paying off your credit cards monthly, not having late payments, and managing your loans, you can expect to reap the rewards of this new system.

For other, a more proactive debt management approach might be necessary to be sure that you will benefit from the New FICO® score system.

What kind of actions do you need to take, then?

Avoid late payments, lower your credit card debt, check and correct errors on your credit report. It is also a good strategy to use a personal loan for consolidating your credit card debt.