New Credit Perks Poised to Improve Credit Score for Millions. But Is This Ideal?

Since the Great Recession of 2008, Credit Scores have steadily been on the rise. In fact, this is the first time in history that Americans have recorded an average credit score above 700.

Nonetheless, if you are yet to reach this target, not to worry. Some good news is coming your way. New criteria are expected to be put in place that will determine how you handle your money in your savings as well as checkings account.

This means that if you exhibit desirable financial habits and practices, it will translate to a positive effect on your credit score.

Additionally, some of the mistakes that crippled your score in the past are poised to have a lesser effect on your creditworthiness.

New criteria have been put in place to improve your credit score based on your financial behaviors

Improving the Overall Credit Score

One of America’s largest credit scoring companies, FICO, has credit scores ranging from 300 to 850.

What this three-digit-number translates to is the likelihood that you will default on your credit obligations, or the possibility that you will become delinquent.

In other words, it is designed to predict risk. So, there’s no questioning how big a role these three digits play in your life.

Indeed, they can be the determining factor in the interest rate that is slapped on your mortgage, car loan, credit cards; or whether you will be awarded a loan in the first place!

Credit reporting companies are also rolling out programs that help individuals improve their credit scores

Introducing Experian Boost

With this in mind, Experian recently unveiled a program known as the Experian Boost.

The program, which is expected to be rolled out this year, will give consumers the ability to affect their credit score by providing information on on-time payments of amenities such as TV, cable, phone, as well as other recurring utility bills.

When you give Experian the consent to access your bank accounts, it derives these payments and proceeds to factor them into your credit score. Which, as expected, will greatly improve your creditworthiness.

According to research conducted by Experian, it is expected that over 8 million Americans could find themselves moving into the decent 580-669 range with their credit scores, or even the desirable 670-739 credit range once the program is used.

The UltraFico Program

Elsewhere, FICO is set to release its pilot program, UltraFICO, which will also be rolled out this year.

According to FICO, the new program will be designed to give individuals updates on their credit history, as well as factor in their banking activities when it comes determining their credit score.

The program will also let individuals know how long they have held their accounts and whether there has been any evidence of saving.

According to senior director of scores at FICO, David Schellenberger, predictive analysts at the company have determined that over 4 million of its consumers could see their credit scores increase by 20 points with the rollout of the new program.

Additionally, the presence of improved standards when it comes to the utilization of existing and new public records has made things much easier.

In fact, three of the largest credit reporting companies in the country do not include tax liens with their credit reports.

This has resulted in some individuals experiencing credit score increases of up to 30 points!

Unfortunately, credit card debt is rising in the United States at an alarming rate

Increasing the Market Size For Lenders

Indeed, all these changes mean that lenders will have a wider pool of potential clients and borrowers to access; especially individuals that fall in the higher 500 to lower 600 ranges of credit scores.

These are individuals that have very limited financial issues. That being said, the new changes have resulted in a massive spike in credit card interest rates, posing a series of financial constraints for consumers.

Additionally, credit card expert Tim Devaney believes that less stringent standards might result in individuals taking up more debt than they can handle financially.

For example, according to the latest report by CreditCards.com, the average card interest rate is at a record high of 17.41 percent, in comparison to the 15.22 percent that was present in 2016.

Regardless of the dangers tied to high-interest rates, the number of credit card accounts being opened in the United States is surging exponentially! In fact, about two-thirds of Americans possess at least one credit card.

If that’s not enough, according to the annual study done by Experian on the debt and credit of America, the average credit card balance settled at $6,375, an increase of 3% from last years data.

Last but not least, the Federal Reserve reported that credit card debt surpassed $1 trillion last year, reaching its highest in American history.