Though some consumers may experience a bump in numbers, about 40 million will see their scores drop—likely around 20 points, according to Fair Isaac reps.
Here’s how Dana Marineau, vice president at Credit Karma, sums it up: “The new model now incorporates consumers’ debt levels, taking into account account balances for the previous 24-plus months, while prior FICO scores have focused on more recent account balances. Consumers who fall or have fallen behind on paying their debts, as well as those with high credit utilization ratios in the past two years, will likely see a decrease in their score.
The real winner here will be lenders, though. According to Fair Isaac, the new model should reduce defaults significantly—particularly for lenders who issue mortgages. Fair Isaac estimates that credit card companies could reduce defaults as much as 10% under the new model, while auto lenders could decrease their rates by about 9%.
Credit scores going down for most means they also have to pay a higher interest rate. Hidden taxes keep getting higher everywhere, but we don't have inflation...yet?
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Source: MarketWatch - 🏆 3. / 97 Read more »
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