First thing’s first, do you know your credit score? If not, the government allows you to view your credit report for no charge once a year. Do NOT be fooled by other websites that claim to offer “free” reports, like Free Credit Report Dot Com (you’ll recognize them by the annoying commercials).
You can view your free report at Annual Credit Report Dot Com.
In 2009 a new score formula will take effect, potentially impacting consumer scores negatively. However, the new formula is expected to more accurately predict defaults.
“Fair Isaac says the new score will do a better job of predicting defaults than the classic FICO, which is used in more than 75% of mortgage lending decisions and by 90% of the largest U.S. lenders.”
Source: MSN Money
The biggest change that could potentially lower your score is the formula’s sensitivity to available credit. Because creditors are both closing old, unused accounts and slashing credit limits, this could lower your score in a big way. The other changes are as follows:
- Small collection amounts will not impact your score as they did previously.
- Credit setbacks, such as a repossession, will not have as large an impact if your other active accounts are in good standing.
- Authorized User accounts will now be ignored.
MSN Money recommends the following to ensure your credit score remains as high as possible:
- Apply for new credit sparingly.
- Do not close accounts.
- Keep balances low (or, at the very least, do not allow those balances to grow).
- Keep accounts active.
- Consider an installment loan – they are categorized differently by FICO. Although, this may be difficult given the current credit squeeze.
The gist? It’s looking like the changes won’t impact most people. Others, such as myself, will likely see a drop in their scores.