If you haven’t already heard, FICO is updating the way they review and score your financial behavior. It’s important for business owners to understand the changes, as this could affect not only your personal borrowing capabilities, but your business’ too.
The new FICO Score 10 looks at 24 months of your financial history with the aim to better understand your borrowing habits by viewing a larger scope of your past, rather than just a snapshot of your current financial health. Here’s where things get tricky. Now that two years of financial health will be looked at, Americans can expect their scores to rise or fall by 20 points or more depending on what their history shows.
So, we know they’re looking over a larger span of time, but what are they actually looking at within that time? Earlier FICO score versions would only look at current credit balances, where FICO Score 10 will be able to see how your credit usage has grown or shrunk over time. If your credit history shows an increase in borrowing rather than a decrease or stable amount of money being used, your score may reflect poorer borrowing behavior.
The other thing to look out for with FICO Score 10 is personal loans. If you took out a personal loan to pay off your credit card debt to take advantage of a lower interest rate, and then proceeded to rack up more debt on those cards, FICO Score 10 will penalize you for this behavior. FICO Score 10 will also look at data such as the amounts paid toward your credit cards.
The good news about FICO Score 10 is that it no longer penalizes you for recent spending or borrowing during the holidays or a vacation . FICO’s new scoring model has a broader view of your borrowing patterns and understands that this one time spike is not consistent with your general behavior. In other words, certain behaviors that were deemed as risky by previous FICO versions will likely be deemed as less risky by FICO Score 10 (if it truly is an inconsistent situation). So, if you’ve been really good about paying down your loans, paying on time, and have kept a good amount of funds available in your accounts, you’re likely to see your score increase.
On the flip side, if you’ve been spotty on your payments and have consistently been spending most of your available balances, your score will most likely drop from where it stands today as FICO Score 10 is likely to judge your behavior as more risky. Also, as previously mentioned, taking out additional personal loans to payoff credit card debt will negatively affect you.
A key factor to remember is that FICO Score 10 will look at your history, not just your current balance.
No one likes change,but look at FICO Score 10 as a way to help make healthier financial decisions. Instead of making short term moves that have immediate but minimal gain, this update can encourage healthier long term decisions and help move or keep you on the path towards financial prosperity.
A collective of better financial decisions over time keeps the economy healthy. FICO wants to reduce the amount of personal loans and overall debt that Americans have incurred over the past five years with the hopes of avoiding another recession. (Because no one wants a repeat of 2008.)
With most business lending, your personal credit history is taken into consideration when making lending decisions, so it is important to stay vigilant on improving your personal and business credit profiles.
Different lenders may adopt the updated FICO Score 10 earlier than others. No matter when your lender updates to FICO Score 10, you should follow these key behaviors to ensure your credit profile is one lenders want to work with: consistently pay your bills on time, keep your available balances as high as possible, and avoid applying for new credit too often.
If you’re worried that FICO Score 10 will negatively impact your score and limit you from purchasing equipment in the future, get funding secured for your business now with American Capital Group. You can acquire new or used equipment from any vendor in the nation at the Lowest Payment, Guaranteed.* To learn more about the options available to you, click here.
If you haven’t already heard, FICO is updating the way they review and score your financial behavior. It’s important for business owners to understand the changes, as this could affect not only your personal borrowing capabilities, but your business’ too.
The new FICO Score 10 looks at 24 months of your financial history with the aim to better understand your borrowing habits by viewing a larger scope of your past, rather than just a snapshot of your current financial health. Here’s where things get tricky. Now that two years of financial health will be looked at, Americans can expect their scores to rise or fall by 20 points or more depending on what their history shows.
So, we know they’re looking over a larger span of time, but what are they actually looking at within that time? Earlier FICO score versions would only look at current credit balances, where FICO Score 10 will be able to see how your credit usage has grown or shrunk over time. If your credit history shows an increase in borrowing rather than a decrease or stable amount of money being used, your score may reflect poorer borrowing behavior.
The other thing to look out for with FICO Score 10 is personal loans. If you took out a personal loan to pay off your credit card debt to take advantage of a lower interest rate, and then proceeded to rack up more debt on those cards, FICO Score 10 will penalize you for this behavior. FICO Score 10 will also look at data such as the amounts paid toward your credit cards.
The good news about FICO Score 10 is that it no longer penalizes you for recent spending or borrowing during the holidays or a vacation . FICO’s new scoring model has a broader view of your borrowing patterns and understands that this one time spike is not consistent with your general behavior. In other words, certain behaviors that were deemed as risky by previous FICO versions will likely be deemed as less risky by FICO Score 10 (if it truly is an inconsistent situation). So, if you’ve been really good about paying down your loans, paying on time, and have kept a good amount of funds available in your accounts, you’re likely to see your score increase.
On the flip side, if you’ve been spotty on your payments and have consistently been spending most of your available balances, your score will most likely drop from where it stands today as FICO Score 10 is likely to judge your behavior as more risky. Also, as previously mentioned, taking out additional personal loans to payoff credit card debt will negatively affect you.
A key factor to remember is that FICO Score 10 will look at your history, not just your current balance.
No one likes change,but look at FICO Score 10 as a way to help make healthier financial decisions. Instead of making short term moves that have immediate but minimal gain, this update can encourage healthier long term decisions and help move or keep you on the path towards financial prosperity.
A collective of better financial decisions over time keeps the economy healthy. FICO wants to reduce the amount of personal loans and overall debt that Americans have incurred over the past five years with the hopes of avoiding another recession. (Because no one wants a repeat of 2008.)
With most business lending, your personal credit history is taken into consideration when making lending decisions, so it is important to stay vigilant on improving your personal and business credit profiles.
Different lenders may adopt the updated FICO Score 10 earlier than others. No matter when your lender updates to FICO Score 10, you should follow these key behaviors to ensure your credit profile is one lenders want to work with: consistently pay your bills on time, keep your available balances as high as possible, and avoid applying for new credit too often.
If you’re worried that FICO Score 10 will negatively impact your score and limit you from purchasing equipment in the future, get funding secured for your business now with American Capital Group. You can acquire new or used equipment from any vendor in the nation at the Lowest Payment, Guaranteed.* To learn more about the options available to you, click here.
