NEW YORK – Starting July 1, major changes are coming to how your credit score will be calculated.
The math behind your credit score is changing, which could alter the behavior to cautious and risky spenders. VantageScore, the company created by the credit bureaus Equifax, Experian and TransUnion, is implementing the new methods.
One of the notable changes is trended data. Creditors will look at borrowers debt on a month to month basis as apposed the current month to watch borrowers’ behavior over time.
Also, keeping unused credit card accounts open can now hurt your score. VantageScore will start to mark borrowers negatively for having large credit card limits on a theory that someone could run up a high credit card debt quickly. Those with prime credit scores would be affected the most because they most likely have more than one credit card open.
Those with low scores may benefit from removing tax liens, civil judgments and medical debts.
Medical debt won’t affect your score anymore. This decision comes from tax liens and civil judgments that were full of errors because they were being reported before insurance companies had time to reimburse the bills.
According to a report by the Wall Street Journal, 700,000 consumers will see their credit score increase by at least 40 points and 11 million will see a 20 points or less increase.