If you plan to buy a Chetek home this year, you’ll want to avoid surprises with your credit score. But there are changes coming to how FICO calculates credit scores, and some consumers could lose points because of it. Here’s what Chetek home buyers should know!
The new scoring model, known as FICO 10, takes effect in the summer of 2020. Its main upgrade involves spotting “risky” consumer borrowing habits, such as increasing debt balances. Simply put, when your debt levels go up, one year over another, your credit score will drop, even if you’ve made on-time payments.
For example, say you have high-interest credit card balances, and you refinance them with an installment loan to pay off the cards. Smart! But FICO says many consumers in this scenario run the credit cards back up, and double their debt load. Statistically, bankruptcies and loan defaults aren’t far behind for these borrowers.
With FICO 10, there is a 2-year look-back at consumer debt levels, and a greater scoring emphasis on debt utilization ratios. In a nutshell, the less outstanding debt you have, the better, especially when it comes to credit cards and unsecured loans.
The new credit score model will take some time to be implemented, and not all lenders will be using it in their decisions this year. Still, it’s wise to address any potential credit issues before you begin the home buying process!
When you are ready to buy a Chetek area home, let the team at Six Lakes Realty be your guide! We are a locally-owned family business with over 40 years of experience. Our friendly, hometown service is just a call away!
Six Lakes Realty
Office: (715) 924-4806