Changes in Credit Scoring

Recently, several changes have been made in the ways in which credit scores are interpreted. After much controversy, the letter grade system, or the VantageScore, for credit scoring has been put into effect. Now, there are letter grades that correspond to the numerical value determined by your credit score. For example, if you have excellent credit, a credit score of over 901, you receive an A credit rating. The three largest credit scoring agencies in the nation have developed a simplified way of scoring individuals by giving people a letter grade. This not only assists the institution from which individuals are requesting credit, but this change helps consumers ascertain their credit standing. The letter grade system is an effort for consumers and companies to see credit history consistently, without having to interpret a confusing numerical score. 901 and 990 is an A, 801 to 900 is a B, 701 to 800 is a C, 601 to 700 is a D, and 501 to 600 is an F. Eventually, lenders hope to market their products and services by using the letter grade system to draw customers with specific letter grade to their companies. This way, customers will know exactly who caters to their individual grades.

Consumers can improve their credit scores in a short period of time by actively participating in a few simple steps toward becoming responsible consumers. Paying every bill on-time each month, keeping credit card balances as low as possible, keeping track of how many lines of credit are open at a time, and not opening new accounts all at once are all ways in which consumers can effectively improve their credit ratings. These simple steps can increase scores in as little as a few months. A higher credit score gives consumers access to better interest rates, higher lines of credit, and a variety of companies from whom credit is granted. Consumers can order copies of their credit reports from any of the three major credit reporting companies: Equifax, Experian, and TransUnion. Be sure to review credit reports thoroughly. If any discrepancies appear on your credit report, contact the credit bureau about filing a dispute for misinformation as soon as possible.

In other credit related news, there have been many initiatives Insurance companies are no longer allowed to increase insurance premiums based on credit scores. Insurance premiums will stay consistent, regardless of credit.

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