There has been a recent change as to how your credit score is factored, at least with one of the three major credit bureaus, and the other two are expected to soon follow suit. Until recently the major factors were to make your payments on time every month by the billing cycle due date, with at least the minimum payment made, another thing you had to remember was to keep your balances at least 30% below the cards credit limit, with the lower then better in regards to your credit score. The last factor poeple had to remember was to apply for new cards sparingly, as applying for too many accounts at once could quickly tank your credit scrore. Following the above 3 golden rules to a good credit score was all it took it keep your credit score high.

Now however a new factor is about to hit all three major credit bureaus, with one already using it according to industry rumors. Besides the credit bureaus, other scoring companies may also follow suit. The new factor will weigh in how much you pay on your debt each month. This will separate those who pay down their debts in full or nearly full every month versus those who continually carry a balance forward every month. Transactors are those who pay that balance down every month, while your revolvers tend to carry a debt forward month after month. FICO has yet to implement this new method, but a FICO spokesperson told the New York Times that they are studying all the data before choosing to implement this or not. If this change does go forward, it will signal a drop for many Americans in their FICO scores, even if they have been making the minimum payments on time every month.

The credit card companies who offer their credit however will not like this change. Revolvers make credit cards their income. Also this change could lead to people borrowing less on their plastic as it could affect their loans for cars, homes and even college more expensive due to the downgrade of ones credit score. On paper a transactor sounds good, as they pay off their balance every month in full or nearly full, but to a credit card company, these type of borrowers are referred to as “deadbeats” as they generate little to no profit for the banks and credit card companies as these type of borrowers avoid interest all together.

The companies behind scoring systems and the credit bureaus are always looking for new ways to score you, to satisfy the needs of the major credit card companies. But most changes will be very likely to be conservative in nature. The credit card companies while they use the FICO scores and the data from the credit bureaus, most will add their own in house formula to your score to personalize it according to their companies own needs.

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