Get ready for a revised FICO formula and the update has long been due. Be sure to notice how the balances you carry may affect credit scores. In late January TransUnion will offer the new score to lenders, Equifax will follow in the spring, and it is unknow when Experian will emerge.The new scores may do a better job of predicting defaults than the classic FICO. Credit Card issuers who cut your credit limits could cause your scores to take a dive - whether you carry a balance or not.
One problem with the new score formula is it is more negative if consumers have several open active accounts. Why? Because more credit card companies are shutting down unused accounts and that may damage your scores. However, other data on the credit report along with how much the credit limit is slashed will be a factor.
There are some benefits for consumers with the new revised formula:
* Collections -for all those small debts that were missed and yet affected credit in a negative way will now affect scores less if those debts are under $100.00.
* Past Credit problems - for consumers who in the past had credit problems like charge-offs or repossession but who have active accounts in good standing the new version is less punishing.
* Authorized users - at this point it is not known, but the new score may only count a certain number of authorized-users and ignore the rest.
*Inquiries or applications for credit may hurt less than in the past but consumers must be carefull and apply only when necessary.
The bottom line - your score could remain the same, go down or go up.
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