The Associated Press recently wrote about some changes coming down the pipeline in how your credit score gets calculated. For some people, these changes may make a huge impact on their score. For others, they may hardly see any change at all. But how will these new credit score changes affect Silicon Valley homeowners? Read on to find out.
New Credit Score Changes
Several factors determine your credit score. The majority is based on your payment history and how much of your credit you actually use. In other words, pay your cards on time and keep a low or zero balance. The longer you've had a line of credit open in good standing, the better effect it has on your credit score, too. New credit score changes may have an impact on these particular areas.
VantageScore was created by the big three credit reporting agencies: TransUnion. Experian and EquiFax. They evaluated more than 8 billion applications just last year. So, most likely, if you applied for credit at any time in 2016, you probably had to go through VantageScore. VantageScore implements their new credit score changes by the end of 2017. What changes do they plan to make?
First of all, those who carry a balance will be scrutinized no matter what the balance may be. VantageScore begins utilizing "trended data" to determine credit scores later this year. "Trended data" takes into account an increase or decrease in credit usage on a monthly basis. If you are consistently paying down your debt, this reflects positively on your score. On the other hand, if your credit usage increases each month, it will negatively impact your score, even if you are well below your limit.
Next, high limit cards could be a thing of the past. Even with a zero balance, a high limit could be seen as a possible way for you to rack up a large amount of debt in a short amount of time. In the past, more open credit was a good thing. Going forward, a couple of cards with smaller limits might be the way to go.
Finally, on a positive note, tax liens and medical debt will no longer count against you. Another one of the new credit score changes no longer takes into consideration any judgments, liens or medical bills when determining your credit score. Too often, errors were found with liens and judgments. Many times, medical companies reported negatively on a patient's credit before insurance companies were able to reimburse the patient's medical expenses.
How New Credit Score Changes Could Affect Silicon Valley Homeowners
So, how will new credit score changes affect Silicon Valley homeowners? Since VantageScore will be implementing these changes, the affect on Buyers wishing to purchase Silicon Valley real estate will be minimal. The majority of mortgage companies still use FICO scores to determine eligibility for a home loan. However, the new VantageScore criteria could affect your ability to get new credit.