How will the new credit scoring model affect you?

Credit score is one of the most important numbers in your financial life. When you apply for a traditional form of credit like a bank loan or credit card, your credit score largely determines the rates and terms you will be offered (and if your application will be accepted at all). Your credit score is designed to inform lenders of how likely you are to repay a loan and is based on factors like how often you pay your bills on time, how much debt you carry, and the length of your credit history.

Every so often, the models that are used to determine your credit score are updated with the intention of painting a more accurate picture of your creditworthiness. This summer, FICO—the leading credit scoring company—will be releasing their newest credit scoring model, the FICO 10. It’s estimated that over 100 million Americans will see their scores change as a result, and 40 million consumers could see their scores drop around 20 points.

The new scoring model will put more weight on payment histories and credit card balances, especially over the last two years. This means that delinquent payments will hurt more, as will carrying high credit card balances from month to month. The good news is that making on-time payments and keeping credit card balances low can improve your score more significantly. Regardless of your history, this new credit scoring model places greater emphasis than ever on practicing good credit habits going forward.

One of VIVA Finance’s primary objectives is to provide an opportunity to build credit, and 40% of surveyed VIVA borrowers said they are using our services for this purpose. VIVA Finance offers unsecured personal loans with rates that are based on employment information—instead of credit score—and can be used to pay off expensive credit card debt and keep balances low. VIVA’s automatic repayment process makes on-time payments effortless, so you never have to worry about missing a payment.

You can visit our website at www.viva-finance.com to explore additional financial education content or see if there is an affordable financing option that serves your needs.