New Credit Score Formula Could Increase Your FICO Score

The credit score formula lenders use to determine your “credit worthiness” may soon change. The higher your FICO credit score, the more likely you are to get a better deal on a mortgage, auto loan and even a cell phone contract. But with the new changes, your credit score could change significantly.

Some of the factors that determine your credit score include paying your bills on time, the amount of credit you’ve established, the amount of credit used versus the amount of credit you have available, and black marks on your credit such as bankruptcy and accounts in collections.

With credit becoming increasingly difficult to secure, it’s important that you know all the facts surrounding your credit report. Credit scores are approximately determined by the following criteria:

* Payment history — 35 percent
* Types of credit used — 30 percent
* Amounts owed — 15 percent
* Length of credit history — 10 percent
* New credit — 10 percent

Sky Blue Credit Repair says the new scoring system will be more accurate than the original system, but until the system is in place it’s difficult to tell if the impact on your credit score will be negative or positive. Some of the proposed changes to the credit scoring system include:

* Stronger penalties for late payments.
* Better rewards for prompt payment.
* Different types of debt will be scored differently.

If you’re worried the updated scoring system may affect you, don’t panic. Typically, when changes are made to the credit scoring system, it takes lenders months, or even years, to make the change. Keeping an eye on your credit report is a good way to make sure you’ve got the credit score you need. If your score is lower than you’d like or you see errors on your credit report, you can take steps to raise the all-important score.

Don’t be caught by surprise when you apply for a mortgage, auto loan or credit card. See how changes to the credit scoring system might increase your score. Check your updated credit score and find out how you can improve your credit score by doing a few simple things with the Suze Orman FICO Kit. Checking your own credit will not hurt your score. Get acquainted with your credit report and be ready for any changes that come your way.