Your Credit Score May Soon Change. Here's Why.

Your credit score — that all-important passport within the financial world — may be about to change. And it won’t necessarily be because of anything you did or didn’t do.

The changes, reported Thursday by The Wall Street Journal, don’t alter the main ingredients of your score, but they do take a more finely tuned view of certain financial behaviors that indicate signs of financial weakness. For example, consumers who consolidate their credit card debt into a personal loan and then run up the balance on their cards again will be judged more severely.

Story continuesEven so, a significant number of lower- and middle-income Americans are struggling, and consumer debt levels are quite high. And lenders are always trying to shield themselves from losses, should economic conditions deteriorate. FICO says the new scores will make it easier for lenders to gauge a borrower’s risk.A: Some of the changes, like carrying a personal loan as well as credit-card debt, affects both new scores.

That could have consequences for a person who leans on credit cards during times of distress, like a job loss. “But that person is probably a bad credit risk, unfortunately,” said Chi Chi Wu, a staff attorney at the National Consumer Law Center. The big credit-reporting companies — Equifax, Experian and TransUnion — will all offer the updated scores by the end of the year. Equifax will be first, sometime this summer, FICO said.A: Because the FICO 10 T calculation has a longer field of vision, it pays to get your financial life in shape as early as possible before applying for a loan.

The biggest shift, however, concerns the amount of debt you carry, experts said. In the past, people trying to polish their scores right before applying for loans were told to pay off their credit cards or get the balances as low as possible a month or two before submitting an application. That won’t work as well now.

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