As of July 1, 2017 the standards for calculating US credit scores has changed and the result could be an improved score for some 14 million people. Before you get too excited, the boost might only be minimal. But for some, that small improvement will be enough to give them access to a previously unavailable line of credit, including a mortgage.
All registered adults generate a credit score and it’s something that is always accessed and reviewed when you apply for a mortgage or housing related loan.
In the US, the most common way to check credit scores is by way of a FICO score, and it’s calculated as follows:
- 35% comes from your credit repayment history.
- 30% is based on any current debts you have.
- 15% is calculated from your full credit history.
- 10% of the calculation is based on the different types of credit you have.
- 10% is determined on any new applications for credit.
Prior to July 2017, credit bureaus included all tax liens relating to unpaid state or federal taxes and civil judgments that are often generated from lawsuits that say you owe money. Now, however, these two details will only be incorporated into your credit score calculation if they’re verified and accompanied by a social security number or date of birth to go with the credit applicant’s name and address.
Credit bureaus are also removing any public record data on these two details that don’t stand up to the new rules, from consumers’ credit history. That’s potentially good news for many hard-working individuals who miss out due to this unverified information appearing on their credit report when they apply for a mortgage.
A Mortgage Could Now Be Within Your Reach
It’s likely that many of those consumers whose records are affected by this rule change will be minor. For some, though, it could make a bigger difference and mean access to a mortgage is now granted where previously it wasn’t. That’s big news for potential home-buyers and could also help them work towards further improving their credit score for the future, too. If, however, your credit score has received only a small boost, you could still be eligible for a better interest rate on a mortgage – or other lines of credit. Industry professionals MoneyBanker, are among the credit experts who are confident that this is the case, too.
By using loan comparison websites that incorporate mortgages into their database, you’re able to gain a clearer idea of what mortgage interest rate is available to you. With this recent change in credit scoring rules, it’s definitely worth taking a look at what’s on offer to you. It could be a much better rate than you imagined!